* U.S. stocks fall 1.25 pct; S&P lowest in about 3 weeks
* Europeans divided over ways to deal with debt crisis
* Gold at record above $1,600/oz as investors seek safety
* Treasuries slip on U.S. debt ceiling, default worries (Updates market action, adds graphic links)
By Richard Leong
NEW YORK, July 18 (Reuters) - World stocks and the euro stumbled on Monday, while gold prices jumped to a record high on fears the debt problems in Europe and the United States may spiral into a global crisis.
European officials and bankers remained divided over steps to keep the fiscal woes of heavily indebted nations from spreading. The euro zone's 17 national leaders will meet on Thursday in Brussels in an attempt to finalize a second round of financial aid for Greece worth 110 billion euros ($154 billion). For details, see [ID:nL6E7II0FP]
Anxiety about a potential Greek default and its repercussions across Europe remains high even after stress tests for euro zone banks released on Friday showed most of them have enough capital to weather such an event. But the results did not wipe out doubts about the banking system if the crisis deteriorates further. [ID:nL6E7IF19G]
In the United States, as the clock ticks toward the Aug. 2 deadline for an increase in the statutory $14.3 trillion borrowing limit, investors were nervous about the stalemate in Washington and chances of the economy slipping into a recession.
The lack of progress in negotiating a U.S. fiscal package has already led two ratings agencies to warn of a credit rating downgrade in the event of a U.S. default. Such a move, some traders fear, could send interest rates soaring and erode the U.S. dollar's reserve currency status.
"There's a perfect storm happening on a global macroeconomic basis with no debt deal here and the ongoing issues in Europe, and the market is looking at all these things and is fairly anxious," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.
These worries knocked Wall Street stocks lower, with the Standard & Poor's 500 index at its lowest in three weeks.
The Dow Jones industrial average <.DJI> was down 166.77 points, or 1.34 percent, at 12,312.96. The Standard & Poor's 500 Index <.SPX> was down 18.20 points, or 1.38 percent, at 1,297.94. The Nasdaq Composite Index <.IXIC> was down 41.53 points, or 1.49 percent, at 2,748.27.
European stocks <.FTEU3> lost 1.7 percent their lowest levels since early December, while the MSCI world equity index <.MIWD00000PUS> shed 1.4 percent. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphics: Inflation adjusted gold price: http://r.reuters.com/pun62s Swiss franc as safehaven: http://link.reuters.com/syt62s Foreign holders of Treasuries http://link.reuters.com/huw62s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
GOLD, SWISS FRANC GAIN
As worries over fiscal burdens persist, investors have been scrambling to shelter their money in cash, gold, the Swiss franc, the Japanese yen and other less-risky investments.
"There is still a great concern about the (euro zone) peripheral debt crisis and in the U.S. we have our own issues with the consensus the U.S. is on downgrade watch," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. "The yen and the Swiss franc are benefiting as safe havens more than the dollar."
The euro
Spot gold
With fears growing that the debt crisis could spread to
Italy or Spain, the euro zone's third- and fourth-largest
economies, Spanish 10-year government bond yields
Unease over a U.S. default seeped into the U.S. Treasuries market, erasing early gains on some safe-haven bids from Europe's debt crisis.
Prices on the benchmark 10-year Treasury note
Worries over sovereign defaults on either side of the
Atlantic and their possible toll on the world economy pushed
oil prices lower. U.S. crude futures