German government bond yields hit their highest in nearly a month on Thursday and world stocks held near 7-week lows as a weak debt sale the previous day fanned fears the euro zone debt crisis may finally begin to threaten its biggest economy.

The euro was also near 7-week lows as markets eyed a meeting of leaders from France, Germany and Italy for any signs of cracks in Berlin's resistance to stronger action to end the two-year old crisis.

Repercussions from the auction -- where bids fell well short of the 6 billion euros on offer -- extended into a second day, with Bund futures falling 115 ticks on the day to 134.66, the lowest since October 31.

Ten-year German government bond yields rose as high as 2.12 percent in early trade.

Investors were reluctant to buy riskier assets even after eight consecutive sessions of losses for world stocks which should make prices attractive.

A lot of people are still cautious with regards to the uptick and it could prove rather temporary as the backdrop is still difficult, Keith Bowman, equity analyst at Hargreaves Lansdown, said.

Events in Europe are still dominating and the German bond auction yesterday just added another level of caution.

MSCI world equity index was steady on the day. The index has fallen 15 percent since January.

European stocks were also broadly unchanged on the day while emerging stocks rose 0.1 percent.

U.S. crude oil rose half a percent to $96.60 a barrel.

The euro was up 0.1 percent at $1.3363, having fallen as low as $1.3318 on Wednesday.

If Germany has to pay higher costs for its borrowing, it's obvious it cannot help the entire euro zone. If German bond yields keep rising, that could even be a trigger for break-up of the euro, said Makoto Noji, senior strategist at SMBC Nikko Securities.

The dollar fell a quarter percent against a basket of major currencies.

(Editing by Patrick Graham)

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