By Jeremy Gaunt, European Investment CorrespondentLONDON (Reuters) - European stock markets took another roller-coaster ride on Friday, opening to losses and them bouncing back sharply while Asian stocks took more losses.The moves were accompanied by the yen hitting a 14-month high against the dollar as risk-related currency plays unwound while demand for government bonds as a safe-haven play rose.Europe's FTSEurofirst 300 <.FTEU3> was up 0.7 percent, Britain's FTSE 100 <.FTSE> gained 1.3 percent, Germany's DAX <.GDAXI> was flat and France's CAC 40 <.FCHI> rose 0.9 percent.The bourses fell as much as 4 percent on Thursday.Earlier on Friday, Japan's Nikkei plummeted more than 5 percent to post its biggest one-day percentage loss in nearly six years.The benchmark <.N225> fell 874.81 points, or 5.42 percent, to end at 15,273.68, the lowest since August 7, 2006. The broader TOPIX <.TOPX> lost 5.55 percent to 1,480.39, the lowest finish since July 2006.Markets are being battered by fears of financial instability following troubles with risky U.S. mortgages and a squeeze on credit that has prompted central banks to push money into the financial system.The U.S Federal Reserve, for example, pumped $17 billion of reserves into the banking system on Thursday and said it was ready to undertake further operations as need.Despite such attempts to build confidence, MSCI's main world index <.MIWD00000PUS> is down around 12 percent from an all-time peak hit about a month ago.Many long-term investors, however, continue to maintain that economic fundamentals bode well for the future and current stock losses may turn out to be a good buying opportunity.CURRENCIES, BONDSThe yen hit a 14-month peak against the dollar in hectic trade. The dollar was down 1.7 percent on the day at 112.24 yen.The Japanese currency has been a major funder of the carry trade in which investors borrow low-yielding currencies to buy assets in higher-yielding ones. This trade is now unwinding as risk aversion grows."Sentiment is just really bad right now," said a trader at a U.S. brokerage in Tokyo. "All people are thinking about is selling currencies against the yen to avert risk."The euro was down 0.2 percent at $1.3401.Euro zone government bond futures opened sharply higher, extending the previous session's hefty gains.The September Bund future was 18 ticks up from Thursday's settlement close of 113.52. It soared more than a full point to as high as 114.11 in late Thursday trading before paring gains in after hours trading as U.S. shares rallied.
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