GLOBAL MARKETS-Fiscal cliff pressures stocks; euro at 6-wk high

* 'Fiscal cliff' uncertainty weighs on U.S. stocks

* Euro jumps to 6-week high on Greece optimism

* Treasuries edge up, commodities struggle on world growth


NEW YORK, Dec 4 (Reuters) - U.S. stocks edged lower on

Tuesday as investors fretted about Washington's ability to avoid

a year-end budget crisis, but a Greek plan to buy back debt

pushed the euro to a six-week high.

Commodities also struggled as weak U.S. manufacturing data

and tense budget talks stoked worries about the world economy.

Markets fear the United States could slip into recession if

$600 billion in tax hikes and spending cuts are allowed to start

taking effect in January. The White House and Congress have yet

to agree on a long-term deficit reduction plan.

"Investors everywhere are focused on what is happening here

related to the 'fiscal cliff' and the risk that nothing will

happen," said Gail Dudack, chief investment strategist at Dudack

Research Group in New York.

"From what I have seen, there is a consensus that something

will happen. Maybe if it is not ideal, something will happen."

Data this week showed U.S. manufacturing contracted in

November, its worst month in more than three years.

On Wall Street, the Dow Jones industrial average was

down 10.98 points, or 0.08 percent, at 12,954.62. The Standard &

Poor's 500 Index was down 4.05 points, or 0.29 percent,

at 1,405.41. The Nasdaq Composite Index was down 15.24

points, or 0.51 percent, at 2,986.95.

Worries about U.S. lawmakers' inability to compromise on

fiscal issues sapped gains in European shares, with the

FTSEurofirst 300 index nearly flat, retreating from a

17-month peak.

World shares as measured by MSCI's all-country equity index

dipped 0.1 percent.

In an interview with Bloomberg Television, President Barack

Obama rejected a Republican proposal to resolve the crisis as

"still out of balance."

The euro, however, remained near a six-week high above

$1.31, boosted by a Greek debt buy-back plan and encouraging

news from Portugal and Spain. Greece's buy-back is a crucial

part of a deal reached last week by international lenders to cut

the country's debt and needs to be completed before the IMF can

release its emergency aid.

"There's some optimism around the Greek buy-back," said Eric

Viloria, senior currency strategist at in New York.

"That's seen as sort of the last major risk event for some time.

"Technically, it looks like (the euro) does have some more

room to the upside."

U.S. government bond prices were slightly higher, but most

investors kept to the sidelines in the absence of progress on

the budget negotiations. The benchmark 10-year Treasury

was up 4/32 to yield 1.6062 percent.

"When things are drifting like this, we see some money

gravitating to investment-grade corporate bonds," said Jim

Vogel, interest rate strategist with FTN Financial in Memphis,


Headlines about the back-and-forth proposals by Republicans

and Democrats have monopolized attention on Wall Street, though

many investors still expect a deal before the year-end deadline,

which could trigger a rally.

With the euro zone mood lifting, Spanish, Italian and Greek

bonds rose while German Bunds stayed on the back foot, though

losses were limited by the potential impasse in U.S. budget


Italian 10-year yields fell to 4.40 percent,

while the Spanish equivalent was down at 5.24 percent

, extending Monday's falls after Greece unveiled

better-than-expected terms for the debt buy-back.

Lingering worries about the world economy, though, pushed

oil and gold lower. U.S. crude oil fell 69 cents to

$88.40 a barrel, and gold fell about 1 percent to its

lowest in nearly a month after prices broke below key support


Weaker manufacturing data raised concern about fragile

global growth, which could hurt demand for energy.

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