Global shares, euro fall on Greece, U.S. fiscal talks

NEW YORK (Reuters) - Stocks around the globe and the euro were mostly lower 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. <.

Stocks, commodities and the euro were steady or slightly weaker following strong gains over the past week as investors priced in the likelihood of a Greek deal and the U.S. fiscal challenge put a damper on market sentiment.

"On the most pressing issue for the markets into year end, that of the tax and spending issues in the U.S., the Sunday morning talk shows didn't reveal that we're on the cusp of a deal as more horse trading will go on in the weeks to come," said Peter Boockvar, managing director at Miller Tabak & Co in New York.

The Dow Jones industrial average .DJI was down 74.45 points, or 0.57 percent, at 12,935.23. The Standard & Poor's 500 Index .SPX was down 6.50 points, or 0.46 percent, at 1,402.65. The Nasdaq Composite Index .IXIC was up 2.10 points, or 0.07 percent, at 2,968.96.

Shares of retailers failed to lift the gloom on stocks after the start of the holiday shopping season.

The MSCI world equity index .MIWD00000PUS, which gained nearly 4 percent last week for its biggest weekly gain since April, was down 0.3 percent at 328.83.

"Last week was very good for the markets and it seems that investors are taking a breather ahead of the euro zone meeting," said Koen De Leus, senior economist at KBC in Brussels.

Euro zone finance ministers and the International Monetary Fund began their third meeting in as many weeks on Monday to try to seal a bailout deal for Greece but must still agree how to cut the country'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," De Leus said.

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 0.4 percent at 106.49 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 $1.2963, 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 1.41 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 9/32, the yield at 1.6608 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 .FTEU3 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 .MIAPJ0000PUS 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.

Brent crude slipped below $111 a barrel while U.S. crude oil futures fell 0.7 percent to $87.68.

Gold fell $3.90, or 0.22 percent, to $1,748.60, after rising to its strongest since October 12 on Friday. Gold has gained around 11 percent this year, mainly due to expectations that U.S. monetary policy will remain loose.

(Reporting by Nick Olivari Additional reporting by Atul Prakash and Christopher Johnson in London; Editing by Dan Grebler)

Updated Date: Dec 20, 2014 14:13 PM

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