GLOBAL MARKETS-Setback in U.S. fiscal talks rattles shares, euro

* Failure of Boehner plan in U.S. House fans uncertainty

* Dollar, government bonds up as safe-havens climb

* Oil slides on worries failed talks may spark recession

By Herbert Lash

NEW YORK, Dec 21 (Reuters) - Global stock markets skidded on

Friday, and the euro and oil futures also slipped as a new

setback in talks to avert a U.S. fiscal crisis and weak data out

of Europe put investors on edge.

A proposal from U.S. Speaker of the House of Representatives

John Boehner to avoid the "fiscal cliff" failed to get support

from fellow Republicans on Thursday, casting fresh doubt over

negotiations to halt automatic tax hikes and spending cuts in

January that could push the U.S. economy back into recession.

Wall Street extended losses after Boehner said congressional

leaders and President Barack Obama must try to move on from his

failed "plan B," but he did not outline a clear path forward.

"The markets are becoming extremely nervous as time is

running out for any compromise solution" in U.S. fiscal

negotiations, said Boris Schlossberg, managing director of FX

strategy at BK Asset Management in New York.

"The greatest fear among investors is that the sudden shock

to U.S. aggregate demand caused by the automatic sequestration

of government spending and the simultaneous hike in taxes could

have a chilling effect on global growth."

MSCI's all-country global equity index fell

0.83 percent to 339.74.

The Dow Jones industrial average closed down 120.88

points, or 0.91 percent, at 13,190.84. The Standard & Poor's 500

Index fell 13.54 points, or 0.94 percent, at 1,430.15.

The Nasdaq Composite Index slid 29.38 points, or 0.96

percent, at 3,021.01.

For the week, the Dow gained 0.4 percent, the S&P 500 rose

1.2 percent and the Nasdaq added 1.7 percent.

A poor reading on U.S. consumer confidence added to the

gloom on Friday.

Thomson Reuters/University of Michigan Surveys of Consumers'

final December consumer sentiment index fell to 72.9 from 74.5

in a preliminary report. Economists in a Reuters survey expected

a final December reading of 74.7.

Weaker-than-expected data from key corners of Europe also

weighed. German consumer morale dropped to its lowest in more

than a year, Britain revised growth figures lower, and Sweden

slashed its economic forecasts.

The combined worries prompted widespread selling in most

major stock markets and led investors to safe-haven assets.

The pan-European FTSEurofirst 300 index closed

down 0.32 percent at 1,139.17, just off a 19-month high of

1,144.15 set earlier this week.

A decline in major bank stocks contributed to the slide in

Europe. The euro zone's blue-chip Euro STOXX 50 index

also retreated by 0.3 percent to 2,651.09 points.

The euro fell 0.45 percent to $1.3183.

The dollar and yen and U.S. and German Government bonds all

rose as declines on equity markets in London, Paris

and Frankfurt compounded tumbles earlier in

Asia.

German Bund futures rose 45 ticks to a settlement

close of 144.77, extending Thursday's gains.

The benchmark 10-year U.S. Treasury note rose

10/32 in price to yield 1.7632 percent.

Bickering U.S. politicians have only 10 days to resolve

their differences. Most observers still assume the two sides

will avert a disaster but tensions are likely to intensify over

the normally quiet holiday period as the deadline looms.

"The markets are likely to interpret this as signaling even

tougher negotiations in coming days," Mohamed El-Erian, chief

executive of bond giant PIMCO, told Reuters.

While the market's slide reflected investors' anxiety, it

was not large enough to suggest they believed a deal would be

reached too late to avoid damage to the economy, said Mark

Lehmann, president of JMP Securities, in San Francisco.

"You could have easily woken up today and seen the market

down 300 or 400 points, and everyone would have said, 'That's

telling you this is really dire'," Lehmann said.

Oil was also caught up in the U.S. disappointment. Brent

crude oil fell $1.23 to settle at $108.97 per barrel,

while U.S. oil futures

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