Stocks, euro slip as crisis drags on

HONG KONG(Reuters) - Stocks fell and the euro dropped 1 percent on Monday as investors worried about Europe's fumbling attempts to solve the euro zone debt crisis and awaited a meeting of the Federal Reserve for clues on whether it will offer fresh stimulus for the sputtering U.S. economy.

A weekend of disappointing news from the euro zone prompted market players to cut risk and move into gold and U.S. Treasuries, even as speculation grew that the Federal Reserve will announce further quantitative steps, such as lengthening the maturity of its debt holdings at a policy meeting this week.

EU finance ministers meeting in Poland broke no new ground in dealing the crisis in talks over the weekend.

A cancellation of a visit by Greek Prime Minister George Papandreou to the United States to chair an emergency meeting and a regional election defeat for Germany's chancellor Angela Merkel also weighed on the beleaguered euro.

Greece on Sunday pledged to take tough decisions needed to secure a fresh round of international aid and avoid default, but announced no new austerity measures.

S&P futures set the weak tone for Asia, falling 1.3 percent.

MSCI's index of Asian stocks outside of Japan fell 1 percent, edging back toward its July 2010 low hit last Monday. Japan's markets were closed for a holiday.

Australia's index .AXJO fell 1 percent while Korean shares lost .KS11 0.6 percent, led by losses in banks after the country's financial regulators on Sunday imposed a six-month suspension on seven ailing savings banks.

"The market will probably start off flat and trade within a limited range as we have not seen strongly positive progress in Europe," said Kim Soo-young, an analyst at KB Investment & Securities.

"Banks in particular may come under pressure after the announcement of mutual banks' suspension," Kim added.

In currency markets, the euro dived a cent against the dollar with investors looking toward a G20 meeting on Thursday and Friday for any likelihood of coordinated action to restore market confidence.

The euro fell to $1.3654, edging back toward a seven-month low hit last week, and to 105.13 yen, as investors reacted to the unproductive European Union meeting.

The dollar .DXY rose 0.8 percent against a basket of major currencies.

The pullback in risk appetite increased demand for gold with the precious metal extending its chunky gains from Friday by 0.7 percent to $1,818. It hit a record around $1,920 per ounce earlier this month.

U.S. crude fell toward the $87 per barrel line as weak U.S. economic data and the troubles in the euro zone pointed toward a slowing global economy.