GLOBAL MARKETS-Shares, euro fall on Greece, U.S. fiscal talks

Reuters Middle East

* U.S. stocks fall as fiscal talks set to resume

* Market focus on outcome of Greece aid negotiations

* Euro edges down vs dollar

NEW YORK, Nov 26 (Reuters) - Stocks around the globe and the

euro mostly fell on Monday, with investors cautious over whether

Greece will receive emergency aid to keep it financially afloat

and no signs of progress by U.S. lawmakers to avoid the U.S.

"fiscal cliff."

Without agreement by Congress and the White House, sharp tax

increases and government spending cuts will take effect in 2013,

raising the specter of stifling the fragile U.S. recovery and

pushing Wall Street indexes to follow the global trend lower.

"My fear is that the can gets kicked down the road for at

least a 6-month period," said Bonnie Baha, head of global

developed credit at Doubleline Capital LP, in Los Angeles. "The

market is going to hate it, especially the stock market."

Stocks, commodities and the euro were steady or slightly

weaker following strong gains over the past week as investors

reacted to a lack of visible progress in both Washington and

Brussels, where Euro zone finance ministers and the

International Monetary Fund were making their third attempt in

as many weeks to agree on releasing emergency aid for Greece.

The Dow Jones industrial average ended down 42.31

points, or 0.33 percent, at 12,967.37. The Standard & Poor's 500

Index was down 2.86 points, or 0.20 percent, at

1,406.29. The Nasdaq Composite Index was up 9.93

points, or 0.33 percent, at 2,976.78.

Shares of U.S. retailers failed to lift the gloom on stocks

after the start of the holiday shopping season.

The Morgan Stanley retail index lost 0.6 percent on


The MSCI world equity index, which gained

nearly 4 percent last week for its biggest weekly gain since

April, was down 0.1 percent at 329.37.

Worrying investors is that euro zone ministers and the IMF

must still agree on how to cut Greece's debt to a more

sustainable level.

Greece, where the euro zone's debt crisis erupted in late

2009, is the currency area's most heavily indebted country

despite a big "haircut" this year on privately held bonds. It

needs the funds to meet upcoming debt repayments.

"There is some caution, but it is also clear that Greece's

lenders will not allow the country to fail. A Greek default is

not an option," said Koen De Leus, senior economist at KBC in


French Finance Minister Pierre Moscovici, speaking on Sunday

after a weekend teleconference of Greece's international

lenders, said the gap had closed significantly, and he believed

a deal could be reached quickly.

The euro was down 0.5 percent at 106.40 yen,

having earlier touched 107.13 yen, the single currency's

strongest level since late April.

Against the dollar, the euro was down 0.1 percent at $1.2968

, having hit its highest since late October on Friday.

Big gains for Catalan separatists in regional Spanish

elections also hurt the euro, even though the result fell short

of the convincing win needed to mount a push for a referendum on

independence for the region.

There was a bigger impact from the Spanish vote in the fixed

income market, where safe-haven German debt prices recovered

some ground lost last week on concern over the outcome and

Spanish bonds prices fell.

Benchmark 10-year German bond yields eased two basis points

to 1.419 percent, while Spanish 10-year bond

yields were last at 5.572 percent.

U.S. Treasury prices also rose on investors' appetite for

safe-haven assets. The benchmark 10-year U.S. Treasury note

was up 7/32, the yield at 1.6677 percent.

Major European share indexes were down across the board

after some regional indexes had their best weekly performance

since December over the past week.

The FTSE Eurofirst 300 index of top European shares

surged more than 4 percent last week but then fell 0.5 percent

on Monday to 1,104.65.

Earlier, optimism around the euro zone's ability to achieve

a deal on Greece lifted MSCI's broadest index of Asia-Pacific

shares outside Japan to a two-week high.


Oil prices were also in retreat after recent gains, but the

move was limited by worries over supply from the Middle East as

violence flared in Egypt and hopes an aid deal for Greece would

brighten the outlook for demand.

Brent and U.S. crude futures fell more than $1 on Monday as

concerns about Greek debt talks and the U.S. budget negotiations

kept the specter of dampened oil demand in focus and pressured

oil and equities prices.

"I think it's mostly baked into the market that there's some

chance of the fiscal cliff causing economic turmoil," said

Bryant Evans, investment adviser and portfolio manager at Cozad

Asset Management, in Champaign, Illinois.

Brent crude slipped below $111 a barrel while

U.S. crude oil futures fell 0.5 percent to $87.79.

Gold fell 0.2 percent to $1,748.51, after rising to

its strongest since Oct. 12 on Friday. Gold has gained around 11

percent this year, mainly due to expectations that U.S. monetary

policy will remain loose.

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