* MSCI World stocks indes down 0.19 pct
* FTSEurofirst 300 down 1.2 percent
* Euro bounces 0.35 percent to $1.2511
By Claire Milhench
LONDON, May 21 (Reuters) - Stocks extended losses on Friday
as markets continued to fret that the European debt crisis would
nip a stuttering economic recovery in the bud but the euro
benefited from a flurry of short covering.
Bund futures opened a touch lower but held near an intra-day
record high set on Thursday as investors sought safe haven
assets.
Funds tracker EPFR Global said investor flows in the third
week of May reflected the uncertainty and heightened risk
aversion with equity funds posting net outflows of over $12
billion and bond funds enjoying inflows of $212 million.
European equity funds had their worst week since late April
2008, with investors pulling a net $4.81 billion, whilst U.S.
bond funds benefited from the flight to safety, the data
provider said.
In early trade, June Bund futures <FGBLc1> were at 128.29,
down slightly from the settlement close, having surged more than
100 ticks on Thursday to an intra-day record high of 128.58.
World stocks as measured by the MSCI All-Country index
<.MIWD00000PUS> were down 0.19 percent, having suffered a near
three-percent drop on Thursday, the biggest one-day percentage
fall in a year. Its more volatile emerging markets component
<.MSCIEF> was down 0.34 percent.
The FTSEurofirst 300 <> index of top European shares
was down 1.2 percent in early trade, after falling sharply in
the previous two sessions as investors panicked about the lack
of policy co-ordination in the euro zone and governments'
inability to get to grips with the debt crisis.
Germany is set to approve its share of a $1 trillion safety
net for troubled euro zone states later today and European
finance ministers are meeting to discuss changes to budget rules
to prevent another Greek-style debt crisis. []
"Europe has certainly not been talking with a unified voice,
which casts some doubt about the way this sovereign crisis will
be handled. If you put on top of that a bit of less enthusiastic
support for growth scenario, you get a correction," said Luc Van
Hecka, chief economist at KBC Securities.
Energy and banking stocks were among the biggest losers,
with the U.S. Senate's approval of a sweeping Wall Street reform
bill weighing on sentiment. []
In Japan, the Nikkei <> closed 2.5 percent down, having
lost over 6.5 percent since the start of the week, the worst
weekly drop since January 2009.
The yen strengthened against the euro, hindering exporters
such as Honda Motor Co <7267.T> and Toyota Motor Co <7203.T>.
EURO BOUNCES
The euro bounced 0.35 percent to $1.2511 as hedge funds and
other short-term traders unwound short positions in the single
currency.
"It's been a big risk-off. If you take off all positions you
take shorts off. The euro has been a big consensus short," said
Geoff Kendrick, senior currency strategist at UBS.
Rumours also circulated around central bank intervention to
prop up the ailing currency.
"The intervention threat doesn't have to feel realistic,
when the market is an extreme position, even just a muttering
(of intervention) can cause a reaction," said Daragh Maher,
senior currency analyst at Credit Agricole CIB.
The battered Australian dollar <AUD=D4> also jumped from
10-month lows to $0.8288 on a wave of buying by investors and
Japanese retail traders and talk of central bank intervention.
The currency had fallen 3 percent against the dollar on
Thursday.
(Additional reporting by Ian Chua, Atul Prakash, Natsuko Waki,
Naomi Tajitsu; editing by Mike Peacock)
