Fears that the credit crisis could deepen rattled global stock investors on Friday and boosted demand for traditionally less risky assets.

There was little on the news front to rationalize the moves, but markets were generally taking their cue from overnight losses on Wall Street.

MSCI's main world index was down 0.6 percent and its more volatile emerging markets stablemate lost 1.5 percent.

We're now focused on the (the global liquidity crisis) entering the broader economy, said Justin Urquhart Stewart, a director at 7 Investment Management.

John Stumpf, chief executive of Wells Fargo & Co, the No. 2 U.S. mortgage lender, said on Thursday that the U.S. housing slump was far from over and was the worst since the Great Depression.

Financial shares were among the worst hit on Friday with Belgian-French bank Dexia leading European shares lower after reporting that third-quarter profits had taken a sharp hit due to the liquidity crisis.

The FTSEurofirst 300 index of top European shares was down 0.7 percent, having earlier hit a two-month low. The index has now gained only 0.8 percent year-to-date.

Earlier, Japan's Nikkei average fell 1.6 percent or 241.69 points to close at 15,154.61. The benchmark has fallen 17 percent from this year's high of 18,300.39 marked in February. So far this year, it is down 12 percent.

The broader TOPIX index lost 1.8 percent to 1,471.67. It is down 12.5 percent year-to-date.

DOLLAR, BONDS

Currency markets were steady although the yen firmed as jittery investors took cues from falling stock markets to continue a move out of relatively risky carry trades.

The low-yielding yen has been popular as a funding currency for the trade, in which investors borrow to invest in high-yielding assets elsewhere.

Risk appetite has been bouncing back and forth ... and a rise in volatility has led to more risk aversion, said Teis Knuthsen, head of FX research at Danske Markets in Copenhagen.

The dollar was down slightly versus the yen at 110.251. The euro was down a quarter of a percent at 161 yen.

The euro was flat against the dollar at $1.4610.

Euro zone government bond futures were higher, bostered by safe-haven flows.

December Bund futures were 20 ticks up on the day at 114.54.

The bias is still up ... given what's happened to equity markets, said Padhraic Garvey, head of investment grade strategy at ING.

(editing by David Stamp)

Japan Nikkei 225