Asian shares and the euro fell Monday as investors reacted cautiously to reports that European leaders were working on new ways to contain their sovereign debt crisis.

Gold extended losses, after sliding a record $100 an ounce on Friday as safe haven seekers abandoned the precious metal in favor of the dollar and U.S. Treasuries.

Trading in the euro was volatile, as hopes that EU leaders, under pressure from tumbling markets, might agree on bolder steps to ring-fence heavily indebted Greece, Portugal and Ireland were offset in investors' minds by a lack of detail about the proposals.

We believe this type of plan would be seen as a credible solution to the crisis, Warren Hogan, chief economist at ANZ Bank in Sydney, told Reuters.

However, this plan is still only in the rumor stage, and it may face some tough hurdles in order to be passed by all EU authorities, indeed headlines are already suggesting some German dissent.

MSCI's broadest index of Asia Pacific shares outside Japan fell 1.8 percent to its lowest level in about 16 months, after dropping 7.5 percent last week. Tokyo's Nikkei fell 2 percent to a six-month low.

After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion euro ($595 billion) rescue fund.

But deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

Global equity markets have been tumbling since late July, hammered by twin fears of renewed recession in the United States and worries that Europe's intractable debt woes could trigger another full-blown banking crisis.

MSCI's Asia ex-Japan index has fallen 28.6 percent since its April high for the year, while the All-Country World index is 23 percent below its May peak.

The euro, which was threatening the $1.50 level in May, has also been under heavy pressure in recent weeks amid growing expectations among policymakers, investors and market economists that Greece may have to default on its debts.

The lurch lower in risk appetite can only reflect a growing fear that policymakers will be incapable of acting in time or with sufficient potency to turn things around, said Hervé Goulletquer, analyst at Credit Agricole.

Given so much hinges on restoring confidence, not just of financial markets but of all economic agents, this trauma and the associated grim headlines risk tipping the global economy over the edge.

The single currency rose as high as $1.3585 in choppy trading on Monday, before falling back to $1.3395, down around 0.8 percent and not far from an eight-month trough of $1.3382 plumbed last week.

The dollar rose 0.3 percent against a basket of major currencies

Commodities continued their slide, after being sold off across the board last week in a broad retreat from riskier assets and as rising the dollar increased the cost of dollar-denominated assets for holders of other currencies.

Oil was weak, after falling to six-week lows on Friday as fears of renewed recession in the developed world raised worries of falling demand.

U.S. crude fell 10 cents to 79.75 barrel and Brent crude eased 15 cents to $103.82.

Fears of flagging demand hammered industrial metals last week, when copper suffered its sharpest weekly decline in nearly three years.
Copper fell further on Monday, dropping 0.8 percent to $7,300 a tonne.

Gold also lost more ground, falling 1.6 percent to around $1,631 an ounce.

(Additional reporting by Cecile Lefort in Sydney and Antoni Slodkowski; Editing by Ramya Venugopal)