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LONDON (Reuters) - European shares and the euro fell on Thursday on fears the euro debt crisis is flaring up again, crimping investors' appetite for riskier assets ahead of a long holiday weekend for many.
Stock futures pointed to a 0.4 percent fall on opening for Wall Street, after leading indexes dropped 1 percent to 1.5 percent overnight.
Chinese shares bucked the softer global trend, posting their biggest single-day rise since early February led by non-banking financial sector firms after Premier Wen Jiabao said the monopoly formed by the country's big banks needed to be broken to get money flowing to cash-starved companies.
A poor Spanish bond auction on Wednesday added to worries that the impact of the European Central Bank's one trillion euro injecton of cheap three-year funds into the banking system may be coming to an abrupt halt.
Spanish 10-year government bond yields rose as high as 5.86 percent on Thursday, dragging Italian rates with them, as investors fled for the relative safety of German and U.S. debt.
"There's been a lot of negative news on Spain over a sustained period of time but market sentiment was being buoyed by strong auction results until yesterday," said Rabobank rate strategist Lyn Graham-Taylor.
"It's quite a dangerous time and if the market starts to panic then the sky's the limit (for borrowing costs), although you may see some policy action come into play."
Spanish stocks remained on the ropes, with the IBEX 35 index .IBEX touching a 7-month low. The MSCI world equity index .MIWD00000PUS was last down 0.2 percent.
Traders cautioned that some of the moves may be exaggerated by thin volumes before the Easter break and while global stock markets lost more than 1 percent of their value on Wednesday, they remain up almost 10 percent this year.
Europe's FTSEurofirst 300 index .FTEU3 fell 0.5 percent, with banking stocks, many of which have large exposure to the region's lower-rated sovereign debt, among the worst performers.
Spanish economic overview link.reuters.com/quf25s
Fed, ECB stimulus vs global stocks: r.reuters.com/rec57s
Spain's cost of borrowing on markets over 10 years jumped 30 basis points on Wednesday after borrowing costs jumped at the country's auction of bonds. The yield premium over German benchmarks is now 411 basis points, its highest since late November, before the ECB flooded the market with three-year funds.
"There is still worry about Spain and it is a four-day weekend and investors do not want to be long going into it as they do not know what potential news could come out," Will Hedden, sales trader at IG Index, said.
The euro dropped 0.6 percent against the dollar to $1.3057, adding to a 1 percent fall on Wednesday. It is at its lowest since mid-March, helping lift the dollar index by 0.3 percent .DXY to 79.955.
Against the yen, the single currency fell 1 percent to a three-week low of 107.047 yen. It was also weaker against the Swiss franc, briefly breaking below the Swiss National Bank's euro floor of 1.2000 francs for the first time since the policy was introduced in September 2011.
Gold .XAU= inched higher after Wednesday's falls as weaker prices tempted some buyers but gains were capped by a strong er dollar and fading hopes of a fresh round of U.S. stimulus.
Additional reporting by Joanne Frearson and Kirsten Donovan; Editing by Ruth Pitchford