* World shares at 17-month highs, European stocks up 0.4 pct
* Wall Street turns lower as "fiscal cliff" talks stall
* Euro at multi-month highs vs dollar, yen
* Brent crude rises above to $110 a barrel
NEW YORK, Dec 19 (Reuters) - Wall Street slid on Wednesday
after talks in Washington to avert the "fiscal cliff" appeared
to stall, though world shares still managed to hit 17-month
highs and the euro surged after an improved economic outlook for
Germany.
Wall Street turned lower as a rise in tensions in Washington
threatened to unravel significant progress made over the last
week in talks that aim to slow the growth of the country's $16
trillion debt.
President Barack Obama accused Republicans of digging in
their heels due to a personal grudge against him while the
Republican speaker of the House of Representatives, John
Boehner, called Obama "irrational." Boehner said that the House
on Thursday would pass legislation that would prevent tax
increases on all income below $1 million -- something that Obama
has threatened to veto.
"The question has shifted to what a deal will look like and
entail, and markets are taking a pause as we consider that,"
said Scott Eldridge, director of portfolio management at Caprin
Asset Management in Richmond, Virginia.
The Dow Jones industrial average was down 63.24
points, or 0.47 percent, at 13,287.72. The Standard & Poor's 500
Index was down 7.92 points, or 0.55 percent, at 1,438.87.
The Nasdaq Composite Index was down 7.51 points, or 0.25
percent, at 3,047.02.
Equity markets in Europe rose as a key business survey in
Germany bolstered investor sentiment by suggesting that Germany,
Europe's biggest economy, was likely to bounce back quickly from
a slowdown.
The growing German confidence also lifted the euro to a
16-month high against the yen and an 8-1/2 month peak versus the
U.S. dollar, while Brent oil rose toward $110 a barrel.
Investors gave little importance to data that showed U.S.
homebuilding permits touched their highest level in nearly 4-1/2
years in November, while ground-breaking activity dropped. The
rise in building permits was led by a 10.6 percent gain in
permits for multi-family homes, offsetting a 0.2 percent slip in
permits for single-family homes.
In Europe, top company shares scaled 18-month highs on
expectations the U.S. fiscal debacle will be averted.
The FTSEurofirst 300 index rose 0.41 percent to end
at 1,142.13, just off a 19-month closing high.
The better tone in global markets was supported by the U.S.
Federal Reserve's efforts to boost the U.S. recovery, signs of
growing economic momentum in China, and talk that Japan is set
for a policy shift to lift itself out of recession.
The latest German Ifo Institute survey of 7,000 firms
bolstered this sentiment by finding that business confidence had
improved for a second straight month in December, in part
because of better export prospects.
The brighter outlook has pushed MSCI's all-country world
equity index to levels last seen in July 2011.
But the index trimmed gains, rising 0.23 percent to 342.23 on
Wednesday.
The yen weakened to its lowest point in more than 18 months
against the dollar on expectations the Bank of Japan will ease
monetary policy at the end of a two-day policy meeting on
Thursday.
The euro rose 0.11 percent to 1.3244 to the dollar
after hitting 112.49, its highest since August 2011. Against the
yen, it gained 0.38 percent to 111.80, its highest
since August 2011.
The dollar index fell 0.11 percent to 79.271 after
hitting a two-month low of 79.008.
The benchmark 10-year U.S. Treasury note rose
6/32 in price to yield 1.7996 percent.
Brent crude settled $1.52 higher at $110.36 a barrel
as it headed toward its highest close in two weeks. U.S. oil
gained $1.58 to settle at $89.51.
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