* No US budget deal in place for "fiscal cliff"
* MSCI all-world index dips
* US stocks extend cliff slide a 5th day
* Oil eases; U.S. bond prices up
NEW YORK, Dec 28 (Reuters) - World stocks declined, the
dollar gained and U.S. shares fell for a fifth day on Friday as
the White House and U.S. lawmakers closed in on the "fiscal
cliff" deadline with no deal in place.
President Barack Obama and Democratic and Republican
lawmakers met Friday as they faced just days to reach a budget
deal to avert massive tax increases and spending cuts that could
drag the U.S. economy, the world's biggest, into recession.
The two sides are attempting to smooth over sharp
differences on raising taxes on the wealthiest Americans and
cutting spending on politically sensitive social welfare
programs such as Medicare and Medicaid. But investors were
skeptical that a deal could be accomplished before the deadline.
The MSCI all-world share index was down 0.5
percent, and the pan-European FTSEurofirst 300 ended
down 0.6 percent.
In U.S. trading, the Standard & Poor's 500 Index was
down 15.67 points, or 1.11 percent, at 1,402.43, marking a fifth
straight decline for the longest losing streak in three months.
The Dow Jones industrial average was down 158.20
points, or 1.21 percent, at 12,938.11, while the Nasdaq
Composite Index was down 25.59 points, or 0.86 percent,
"There's a pretty good chance that we won't have something
in hand by year-end," said Jonathan Golub, chief U.S. equity
strategist at UBS, in New York. "It should be pretty obvious
that that is now the majority case."
Golub, however, said investors were still counting on a deal
that would avoid most of the tax hikes and spending cuts next
year even if it does come after the deadline.
Allowing $600 billion of higher taxes and spending cuts to
start in January would prevent U.S. debt spilling beyond a $16.4
trillion agreed limit. Analysts fear the measures could wipe as
much as 4 percent off the country's growth rate.
Energy companies were among the biggest decliners on Wall
Street, with shares of Exxon Mobil down 2 percent at
$85.10 and the S&P energy index leading sector losses.
The U.S. dollar edged up to a two-week high against major
currencies as investors waited to see if U.S. politicians can
strike a last-minute budget deal.
"Headline risk is likely to remain a driver of FX markets in
the near term," said Eric Theoret, FX strategist at Scotia
Capital in Toronto.
An agreement on the U.S. budget would be viewed as positive
for riskier currencies such as the euro and Australian dollar,
while a deadlock is deemed positive for the safe-haven and
highly liquid dollar.
Against a basket of currencies at 79.930, the dollar was last
up 0.1 percent at 79.665.
At the same time, expectations that Japan will inject new
stimulus into its economy pushed the yen to yet another two-year
low for a third straight day.
The dollar was steady against the yen at 86.06 yen,
having earlier risen to 86.63 yen, its strongest since August
In the U.S. bond market, benchmark Treasury debt prices rose
for a third consecutive session on safe-haven buying as the
faded hopes for a deal on the fiscal cliff.
Benchmark 10-year notes traded 12/32 higher in
price, with yields falling to 1.69 percent, marking the lowest
in two weeks and down from 1.73 percent late Thursday. Benchmark
notes posted their biggest daily dip in yield in over seven
weeks and were down about 8 basis points on the week.
U.S February crude slipped 7 cents, or 0.08 percent,
to settle at $90.80. Trade was choppy, awaiting news on the U.S.
budget talks, but the market was pressured by data showing that
fuel stockpiles rose sharply and crude stocks fell less than
expected last week.
Brent February crude fell 18 cents, or 0.16 percent,
to settle at $110.62.
In other commodity markets, U.S. gold futures for February
delivery settled down $7.80, or 0.5 percent, at $1,655.90
an ounce in New York.
Traditionally a safe haven and inflation hedge that
investors rush to in times of trouble, gold has lately behaved
like a risk asset - often rising and falling with the stock
market and sometimes following the dollar.