* Euro-debt worries hit stocks, euro again
* Euro drops 1 percent against U.S. dollar
* World stocks fall 1 percent (Updates with U.S. close)
By Al Yoon
NEW YORK, Nov 26 (Reuters) - World stock markets and the euro slumped on Friday on concern the European sovereign debt crisis will spread within the continent.
Also clouding markets, China warned against military acts near its coastline before U.S.-South Korean naval exercises, which North Korea said risked pushing that region toward war. The North shelled a South Korean island on Tuesday. For details, see [ID:nL3E6MQ058] [ID:nKOREA].
Worry about the most deeply indebted European nations has intensified, fueled on Friday as newspaper reports shifted attention from Irish debt to Spain and Portugal. The crisis has lingered amid questions whether indebted countries can meet bond payments.
"Officials now seem to be pressing Portugal to take aid and that's unsettling investors. Peripheral issues are unlikely to go away in the short term, and the euro will remain under pressure into the end of the year," said Manuel Oliveri, currency strategist at UBS in Zurich.
The Financial Times Deutschland reported, without identifying its sources, that a majority of euro zone members and the European Central Bank were urging Portugal to apply for a financial bailout. [ID:nLDE6AP08Y].
European officials denied "absolutely false" reports Portugal was under pressure to seek a bailout and Spain ruled out needing help to manage its finances despite fears of a spreading euro debt crisis. [ID:nLDE6AP1BO]
The Irish Times, meanwhile, said officials at the International Monetary Fund and in the European Union were examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland's banks. [ID:nLDE6AP0BY].
Bond rating company Standard & Poor's cut its ratings on the four domestically owned Irish banks, citing weakened credit-worthiness.
The mounting worry pushed world stocks lower. MSCI's all country world index .MIWD00000PUS dropped more than 1 percent, extending the decline since Nov. 5 to 5 percent.
Commodity-related shares led U.S. stocks lower in a shortened post-holiday session as investors sold risky assets on worries that euro-zone debt problems may spread.
The Dow Jones industrial average .DJI dropped 95.28 points, or 0.85 percent, to 11,092. The Standard & Poor's 500 .SPX declined 8.95 points, or 0.75 percent, to 1,189.40. The Nasdaq Composite .IXIC lost 8.56 points, or 0.34 percent, to 2,534.56.
Nov 26, 2010�1:54pm EST
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Frankly, once again it is the press and irresponsible journalism that fosters speculation and worry. Economic collapses are built substantially on public sentiment, which waxes and wanes based on the publication of irresponsible speculative articles that feed fear, uncertainty and doubt.