GLOBAL MARKETS-Stocks, euro fall on Italy outcome worries
* Projections show center-right leading in Italy elections
* World stocks dip along with U.S. stocks
* Yen falls against dollar on BOJ report
By Caroline Valetkevitch
NEW YORK, Feb 25 (Reuters) - Stocks and the euro fell on Monday as concern grew that an unclear outcome in Italy's elections could hamper the country's effort to implement economic reforms.
The center-right coalition led by former Prime Minister Silvio Berlusconi was leading in the race for the Italian Senate after the first projections, dashing early hopes of a pro-reforms center-left victory in the vote.
The outcome of the election is expected to hold the key to whether the current reform program will continue uninterrupted in the euro zone's third-largest economy. A victory by the center-right coalition could cause instability in one of the euro zone's largest economies as Italy copes with a deep recession and weak growth.
The market would celebrate the center-left victory because it would continue the path to pay down Italian debt, said Art Hogan, managing director of Lazard Capital Markets in New York.
"What we don't want to hear is a renewed fear about a euro zone fracture," he said.
The MSCI world equity index was down 0.1 percent, reversing early gains. Italy's main FTSE MIB stock market index was up 0.7 percent, having pared early gains of more than 3 percent, while the pan-European FTSEurofirst 300 index provisionally closed up 0.04 percent at 1,166.07.
On Wall Street, the Dow Jones industrial average was down 45.76 points, or 0.33 percent, at 13,954.81. The Standard & Poor's 500 Index was down 5.37 points, or 0.35 percent, at 1,510.23. The Nasdaq Composite Index was down 3.59 points, or 0.11 percent, at 3,158.22.
In the foreign exchange market, the euro hit a session low of $1.3158 and last traded at $1.3172, down 0.1 percent on the day.
Against the yen, the euro hit a session low of 122.81 yen and last traded at 123.08, down 0.1 percent on the day, according to Reuters data.
The yen fell for a second straight session against the dollar on news that Japan's prime minister is likely to nominate Asian Development Bank President Haruhiko Kuroda as the next central bank governor to step up his fight to rid the country of deflation.
The dollar shot up to 94.76 yen, a high not seen since May 2010. The U.S. currency last traded at 94.08 yen, up 0.7 percent on the day, according to Reuters data.
Japanese Prime Minister Shinzo Abe won a big election victory in December, promising to revive the fortunes of an economy stuck in the doldrums for most of the past two decades.
Abe's repeated calls for more forceful central bank action are largely behind the currency's nearly 20 percent fall against the dollar since November, when he began calling for bolder monetary easing.
Investors also are looking ahead to testimony by Federal Reserve Chairman Ben Bernanke to Congress on Tuesday and Wednesday, in which he is expected to downplay the idea that the U.S. central bank could prematurely end its current massive monthly bond-buying program.
In the bond market, the benchmark 10-year U.S. Treasury note was up 9/32, the yield at 1.929 percent.
Brent crude rose 57 cents to settle at $114.67 a barrel.
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