January 02, 2012, 4:20 AM EST

By Shiyin Chen and Saeromi Shin

Jan. 2 (Bloomberg) — The euro pared losses against the dollar and yen while European shares were little changed on the first trading day of 2012 as the region’s crisis enters a new year. Emerging-market stocks fell, snapping two days of gains.

The 17-nation euro weakened 0.1 percent to $1.2950 as of 8:22 a.m. in London, after earlier dropping as much as 0.3 percent. It erased a 0.2 percent decline against the yen. The Stoxx Europe 600 Index rose 0.1 percent, following last year’s 11 percent slump. The MSCI Emerging Markets Index slipped 0.3 percent. Financial markets from Japan to the U.K. and the U.S. are closed for a holiday.

Indexes of stocks and commodities had the worst yearly returns since the financial crisis in 2008. Data today may confirm European manufacturing shrank for a fifth straight month, as regional leaders return to work from the Christmas holidays seeking to buy time to rescue the single currency from fragmentation. South Korea said yesterday export growth will slow this year, while China’s manufacturing expanded in December.

“With many markets closed, it’s hard to make one-way bets especially in the absence of strong leads,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $28 billion. “There’s the ongoing crisis in Europe, and global demand will continue to be generally weak this year. The thing is how much China could provide buffers, but it’s still unclear.”

Europe’s Debt

The euro traded at 99.67 yen, after falling on Dec. 30 below 100 for the first time since June 2001. Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details.

“The path to overcoming this won’t be without setbacks, but at the end of this path, Europe will emerge stronger from the crisis than before,” Merkel said in a New Year’s speech broadcast Dec. 31. She said that her government will do “everything” to bring the euro out of the slump.

A gauge of euro-region manufacturing was 46.9 in December from 46.4 the previous month, according to economists surveyed by Bloomberg News before Markit Economics releases the data today. A reading below 50 indicates contraction.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, rose 0.1 percent, the first increase in three days. It climbed 1.5 percent in 2011. Treasuries gained 9.78 percent last year, the most since 2008, as investors sought the relative safety of U.S. debt. Standard & Poor’s 500 Index futures didn’t trade because of the holiday.

‘Wary’ Investors

“Investors are demanding dollars as they are wary of the ongoing European debt crisis,” said Ha Jun Woo, a Seoul-based currency dealer at Daegu Bank in Seoul.

Almost two shares advanced for every one that declined on the Stoxx 600. Germany’s DAX Index gained 0.5 percent, while France’s CAC 40 was little changed after gaining as much as 0.5 percent. Porsche SE dropped 1.3 percent as a group of investment funds sued the carmaker over a failed takeover attempt of Volkswagen AG in 2008.

The MSCI Emerging Markets Index fell, extending its 2011 drop of 20 percent. Taiwan’s Taiex Index sank 1.7 percent, Indonesia’s Jakarta Composite Index retreated 0.6 percent, while South Korea’s Kospi Index was little changed.

Korea, China

South Korea’s export growth will probably slow to 6.7 percent this year from 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Finance Minister Bahk Jae Wan said the economic outlook will be more uncertain and difficult in 2012 and called for a strengthening of contingency plans to prevent contagion from Europe’s debt crisis.

Data yesterday showed China’s purchasing managers’ index climbed to 50.3 in December from 49 in November, beating all forecasts in a Bloomberg News survey of 15 economists.

The Institute for Supply Management’s factory index climbed to a six-month high of 53.4 in December, while spending on construction projects advanced 0.4 percent in November, the fourth straight monthly gain, economists surveyed by Bloomberg projected ahead of U.S. reports tomorrow. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists in a Bloomberg News survey before Labor Department data on Jan. 6.

–With assistance from Jiyeun Lee in Seoul. Editors: Richard Dobson, Ovais Subhani

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net