* Euro wobbles, may test crucial level of $1.25
* Asian stocks fall 0.6 pct on worries about U.S., Europe
* European stocks open as much as 0.7 pct lower
* Nagging doubts over euro zone debt plan weigh
* Spike in volatility prompts investors to take profits
(Repeating to more subscribers)
By Koh Gui Qing
SYDNEY, May 14 (Reuters) - The beleaguered euro hovered
just above a major support level of $1.25 on Friday as worries
about Europe's debt problems plagued markets, pressuring stocks
and pushing safe-haven gold to near record highs.
Weakness in Asia carried over into European shares, where
major markets fell as much as 0.7 percent.
The declines in stock markets across Asia showed many
investors were not ready to put money back into riskier assets,
with the week's rebound in regional equities clawing back less
than half of last week's plunge.
Instead, investors flocked to safer assets such as the U.S.
dollar, gold, bonds and money market funds, fearing that
Europe's debt problems may choke off a recovery in the world
economy.
"Love for the euro is almost non-existent at the moment,"
said Adam Carr, an economist at ICAP in Sydney. "I don't know
if there is a near-term catalyst to change the euro's
fortunes."
Doubts that troubled European nations can overhaul their
poor public finances, and fears that the region's ailing growth
would suffer even more if austerity measures were successful,
kept the euro under pressure just above its 14-month low of
$1.2510.
By early afternoon in Asia, the euro was trading at $1.2530
<EUR=>, little changed from levels seen overnight in New York.
There was talk that some investors were trying to support it
around these levels to protect option-related interests at
$1.25.
But some traders said it may drop further if it breaches
$1.25 as stop-loss sell orders kick in from investors who had
bet on a bounce and want to limit any losses.
Less than a week after European authorities and the IMF
tried to calm markets with a $1 trillion emergency aid plan,
the euro has slid back to levels seen before the package was
announced and stocks are again in retreat.
The MSCI index for Asian stocks outside Japan
<.MIAPJ0000PUS> dropped 0.6 percent.
For the week, it gained around 3.6 percent, riding on a
short-lived burst of optimism on Monday over the new euro zone
rescue package. But it retraced less than half of last week's
8.4 percent dive, the largest weekly drop since the collapse of
Lehman Brothers in September 2008.
Japan's Nikkei average <> fell 1.5 percent, dragged
down by a 6.7 percent tumble in electronics giant Sony Corp
<6758.T> after it forecast profits that were not as strong as
some had hoped []
Losses in Japanese stocks were further fuelled by worries
that a firm yen would eat into exporters' earnings power.
Investors typically buy the yen in uncertain times as a
safe-haven.
Asian markets were also pressured by losses on Wall Street,
where downbeat comments from tech giant Cisco Systems Inc
<CSCO.O> and retailer Kohl's Corp <KSS.N> cast doubt on the
strength of the U.S. economic recovery. []
The movement of cash between markets further attested to
investors' anxiety.
Money market funds, perceived to be among the least risky
investments, attracted new money this week for the first time
since January as investors moved back into cash, data from EPFR
Global showed. []
At the same time, the amount of money pulled from risky,
high-yield bond funds hit a five-year high, while equity funds
in emerging markets also suffered.
Stock investors seemed to prefer putting money instead in
the United States, where flows into equity funds hit a 19-week
high despite a mysterious "flash crash" on Wall Street on May 6
which authorities have still been unable to explain.
[]
Oil <CLc1> was down 0.7 percent at $73.89 a barrel, hurt by
concerns that a slowdown in Europe would curb energy demand.
Gold <XAU=> traded at $1,235.90 an ounce, after hitting a
record high of $1,248.15 an ounce on Wednesday as investors
sought a safe haven from euro zone uncertainties.
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NO BULLS IN CHINA SHOP?
Stock market bears also re-emerged in China, where the
Shanghai Composite Index <> fell 0.5 percent after a rare
winning session on Thursday.
Fears that China's central bank would step too hard on the
brakes of the economy by aggressively tightening monetary
policy have taken a heavy toll on Chinese shares in Shanghai
and Hong Kong this year.
Shanghai is the worst performing stock market in Asia so
far this year, plunging 18 percent, outstripping a 2.6 percent
decline in the MSCI Asia ex-Japan index.
"A lack of positive news is weighing on the market, while
the lower potential for funds entering the market is also
adding pressure," said Chen Shaodan, analyst at Stockfly
Securities in Beijing.
Starmine shows Chinese stocks are forecast to trade at a
price-to-earnings ratio of 13 times next year, lower than last
year's 15.8 times.
That suggests investors are either discounting for slower
growth on the back of tighter policy, or that they expect
companies to still post strong profits despite the central
bank's moves.
(Additional reporting by Anirban Nag in SYDNEY; Editing by
Kim Coghill)
