Global shares, oil fall on fears of U.S. 'fiscal cliff'

NEW YORK Fri Dec 14, 2012 3:55am IST

Traders work on the floor of the New York Stock Exchange, December 10, 2012. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, December 10, 2012.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - A seven-day rally in world shares came to a halt and commodity prices slipped on Thursday after negotiations over the U.S. "fiscal cliff" hit a wall, with both Republicans and the White House voicing frustration at the lack of progress.

Wall Street turned lower after U.S. House of Representatives Speaker John Boehner, the top congressional Republican, refused to give ground in negotiations with President Barack Obama on a new fiscal plan.

Boehner voiced frustration about talks with the White House to avert the steep tax hikes and spending cuts that will be triggered at the end of the year unless Congress intervenes.

Investor skittishness led the S&P 500 to end a six-day winning streak, European shares to slip from 18-month highs and MSCI's all-country world index to cap seven straight days of gains.

"There is no conviction here and Boehner's comments - as harsh as they were - were realistic," said Jason Weisberg, managing director at Seaport Securities Corp. in New York.

"The 'fiscal cliff' is already built in. That being said, people don't like to be told the apocalypse is coming over and over and over again. The real players in this market have already closed their books," Weisberg said.

Data showing U.S. retail sales rose in November and jobless claims fell sharply last week were hopeful signs for an economy that appears to have slowed sharply this quarter. But the news failed to buoy investors consumed by the budget talks.

The Dow Jones industrial average closed down 74.73 points, or 0.56 percent, at 13,170.72. The Standard & Poor's 500 Index fell 9.03 points, or 0.63 percent, at 1,419.45. The Nasdaq Composite Index slid 21.65 points, or 0.72 percent, at 2,992.16.

MSCI's world equity index fell 0.29 percent to 336.82.

European shares slipped, led by a fall in heavyweight healthcare stocks, after uncertainty over the U.S. budget talks prompted investors to cash in an eight-session winning streak.

The FTSEurofirst 300 index closed down 0.42 percent at 1,134.86, ending a three-week rally that had pushed prices to 18-month highs.

Crude oil prices slipped under $109 a barrel due to rising U.S. oil stocks and fears that the world's largest economy might risk a recession if a resolution to the budget issue is not reached.

With the front-month January contract approaching expiration on Friday, Brent crude's losses were deeper than for its U.S. counterpart.

Benchmark Brent crude settled down $1.59 to $107.91 a barrel. U.S. crude fell 88 cents to settle at $85.89.

The Thomson Reuters-Jefferies CRB Index, which tracks 19 commodity markets, was down 0.85 percent at 292.6968.

The dollar held steady against the euro after falling for three straight days as the looming fiscal crisis curbed weakness in the currency after the Federal Reserve on Wednesday announced further monetary stimulus.

The Fed met market expectations by saying it would keep buying $45 billion of government bonds each month after its "Operation Twist" program expires. That is in addition to its purchases of $40 billion a month in agency mortgage-backed securities.

The euro was 0.03 percent higher at 1.3076, while the U.S. dollar index rose 0.13 percent at 79.919.

U.S. Treasury debt prices eased after data showed claims for unemployment benefits were lower than expected in the latest week, which undermined the safe-haven appeal of lower-risk U.S. government debt.

The benchmark 10-year U.S. Treasury note was down 7/32 in price to yield 1.7265 percent.

(Reporting by Herbert Lash; editing by Andrew Hay and Dan Grebler)

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