Stocks were set to open lower on Wednesday as policymakers warned Europe's debt crisis posed dangers to the global economy and on growing signs the contagion was starting to spread to larger European nations.

The yield spread of 10-year French government bonds over their German equivalents widened to a euro-era high on fears the crisis was starting to move to economies that had been considered more isolated from the problems.

Bank of Japan Governor Masaaki Shirakawa said the crisis was already affecting emerging nations and Japan in multiple ways, while the Bank of England forecast Britain was on the brink of a contraction.

Reflecting a belief by some U.S. investors that equities may be able to whether the storm, Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said while the crisis would affect some U.S. companies he believed it would be slight.

I believe that market participants are really overreacting to the turmoil in Europe, he said. The impact of the euro zone will have some effect on U.S. corporations, particularly S&P 500 companies with respect to their exports.

S&P 500 futures fell 13 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures were off 88 points, and Nasdaq 100 futures lost 13.25 points.

The European Central Bank bought euro zone government bonds to stop a selloff, traders said. Equities rose on the move but then lost ground as the yield on Italian 10-year bonds continued to hover near 7 percent.

U.S. equity investors have become avid watchers of European sovereign debt prices and the euro currency, currently barometers of risk aversion for the wider market. Trading has been volatile, with large intraday swings as sentiment oscillates with developments is Europe.

It is clear that they (Europe) have a severe liquidity crisis developing and it is becoming more and more clear that they are going into a severe recession, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

They have got to get their act together and resolve this issue or this recession is going to be worldwide.

Still, U.S. stocks have shown resilience, clinging to the top end of their recent trading range at around 1,250 on the S&P 500. Traders watched for a break below 1,230 as a potential warning sign. The index closed at 1,257.81 on Tuesday.

In U.S. company news, Dell Inc , the computer maker, missed quarterly revenue estimates, and said full-year revenues could be hurt by an industrywide shortage of hard drives. The shares fell 2.3 percent to $15.27.

Shares of Abercrombie & Fitch Co slumped 8.4 percent to $51.01 after the teen clothing retailer's quarterly profit missed estimates by a huge margin.

Target Corp posted higher quarterly profit on higher food sales and as a 5 percent discount to cardholders drew shoppers. The shares rose 3.1 percent to $54.80.

(Editing by Jeffrey Benkoe)

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