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LONDON (Reuters) - The euro and global stocks fell on Wednesday after ratings agency Fitch called on the European Central Bank to do more to solve the currency bloc's debt crisis, unnerving investors ahead of auctions for Spanish and Italian bonds later in the week.
U.S. stock index futures also turned lower, pointing to a weaker start on Wall Street, hurt by computer giant Microsoft's (MSFT.O) warning that sales of personal computers will probably be lower than analysts expect in the fourth quarter.
The euro hit session lows of $1.2695 after Fitch said the ECB needed to ramp up its buying of troubled euro zone debt to support Italy and prevent a "cataclysmic" collapse of the euro.
"Can the euro be saved without more active engagement from the ECB? Quite frankly we think no," David Riley, the head of sovereign ratings for Fitch, said at an investor roadshow in Frankfurt.
The shared currency was down over 0.5 percent and close to a 16-month trough at $1.2666 set on Monday.
Italian 10-year bond yields rose back above 7.0 percent and Spanish yields rose about 10 basis points to 5.34 percent as investors sought higher returns to hold the debt.
Investor attention is focusing more on Spain, which sells up to 5 billion euros of 2015 and 2016 paper on Thursday, just hours before an ECB interest rate decision. Italy offers up to 4.75 billion euros of five-year bonds on Friday.
The concerns about Europe's deep-rooted debt problems nudged the FTSEurofirst 300 .FTEU3 index of top European shares down 0.7 percent to 1,020.05 points after it touched 1,029.32 earlier in the session, the highest since early August. The index surged 1.8 percent in the previous session.
The MSCI world equity index .MIWD00000PUS also reversed early gains to be down 0.3 percent.
Euro zone debt crisis in graphics (package): r.reuters.com/hyb65p
Euro zone sovereign debt supply outlook 2012: r.reuters.com/gev45s
Crude imports and exposure to Iran: link.reuters.com/dab65s
Concerns were also growing over Greece where negotiations with private sector bondholders over a debt restructuring plan are coming to a head.
Hedge funds are taking on the International Monetary Fund over its plan to slash Greece's towering debt burden as time runs out to seal a deal to secure further funds from its euro zone partners.
Greece is needs to conclude a deal on the funding otherwise it may face a default in March, when 14.5 billion euros of its bonds mature.
The concern over Greek efforts to secure further aid boosted safe-haven demand when Europe's dominant economy Germany sold 3.15 billion euros ($4 billion) of five-year government bonds on Wednesday.
Redemptions from other AAA-rated issuers this week also helped the sale, offsetting news that Germany's economy was showing the first signs of pain from the euro crisis, shrinking by 0.25 percent in the last three months of 2011 compared with the previous quarter.
Overall, German gross domestic product (GDP) grew 3.0 percent in 2011, according to official preliminary data, down from the previous year's growth rate of 3.7 percent, but outperforming its peers in euro zone due to strong domestic demand and exports.
Germany weathered the region's debt woes better than its euro zone peers last year, supported by foreign as well as domestic demand, but recent data points to a weaker start for 2012.
Even so, "We don't think Germany will fall into recession. We think growth of about 1 percent is possible for this year," UniCredit economist Andreas Rees said.
European shares had hit a one-week closing high on Tuesday, and the S&P 500 index reached a five-month peak, after an upbeat forecast by aluminum company Alcoa about the demand outlook for the metal and amid rising hopes of a policy easing in China.
The stock market was seen as having the potential for further gains if the Europe's debt woes ease.
"It's really the time to allocate more funds to equities. Current prices represent a historic buying opportunity in terms of asset allocation," said Eric Galiègue, head of Valquant, in Paris.
Gold rallied for a second day on Wednesday, hitting its highest in a month after a stronger euro helped boost the price above a key technical level and evidence of strong demand from major consuming nations further supported the market.
Spot gold was up 0.5 percent at $1,640.50 after hitting a four-week high of $1,646.56 an ounce in Asia.
A blast in Tehran highlighted concerns about disruption of oil supply from Iran, pushing Brent crude higher on Wednesday, outweighing worries about the effect on demand growth of Europe's debt crisis.
Brent crude slipped below $113 on Wednesday as the worries over Europe's debt crisis and expectations of a rise in oil inventories in the United States for the third straight week overshadowed concerns of supply disruption from Iran and Nigeria.
($1 = 0.7826 euros)
Additional reporting by Nia Williams; editing by Stephen Nisbet/Ruth Pitchford