* Japan LDP back in power after landslide election win
* Yen slumps to 20-month low vs dollar, 7-mth low vs euro
* Shares, oil dip on U.S. fiscal uncertainty
* U.S. stocks seen little changed, Apple in focus
LONDON, Dec 17 (Reuters) - A win by Japan's conservative Liberal Democratic Party lifted the dollar to a 20-month high against the yen on Monday, while uncertainty over the prospects for a U.S. budget deal sent European shares lower.
U.S. stock index futures pointed to mixed open on Wall Street where tech giant Apple's shares will be in the spotlight because of sharp falls in pre-market trade after Citigroup cut its rating for the stock.
The biggest moves of the day came in the currency market following a landslide election victory for Japan's LDP on Sunday which opened the way for a shift in economic strategy designed to lift the world's third largest economy out of recession.
The triumph was seen as piling pressure on the Bank of Japan to ease further at its next policy meeting, which ends on Thursday, setting the stage for an even bigger fall in the yen.
"I wouldn't be surprised if we were talking about, in March or April time, a move that has taken us up into the mid-nineties (for dollar/yen)," said Simon Derrick, chief currency strategist at Bank of New York Mellon.
"I think when it moves it's quick and I think it's going to happen."
The dollar was up 0.3 percent on the day at 83.70 yen , having earlier hit 84.48 yen after the election result became clear, its strongest level since April 2011.
The yen's fall also boosted the euro, which jumped to around 111.30 yen, its highest since late March and near its year's high of 111.43 yen.
Japan's Nikkei stock index bucked the downward trend in Asian markets to close at an 8-1/2-month high on expectations the weaker yen will boost exports by Japanese firms.
Meanwhile investors were still focused on the year-end deadline to avoid the imposition of steep U.S. tax hikes and spending cuts, known as the "fiscal cliff", which could send the giant economy back into recession.
A new proposal for tax hikes on incomes over $1 million a year from U.S. Republican House Speaker John Boehner on Sunday was seen as a step forward but was still some way from the position of President Barack Obama.
Anxiety over the unresolved differences between the two sides is holding back a rally in equity and commodity markets spurred by the easier monetary policies of the world's major central banks.
"Global stock prices have almost doubled since March 2009 with total return indices in the U.S., UK, Germany and some emerging markets at or near all time highs," said Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment.
The MSCI world equity index edged down 0.02 percent to 336.30 points, though in the last month it has added about six percent for a year to date gain of 12.3 percent.
After making strong gains in recent weeks on the brightening outlook, the FTSE Eurofirst 300 index was down 0.3 percent on Monday following on from a 0.5 percent decline in Asia share markets outside Japan.
London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were flat to 0.5 percent lower.
The major debt markets, however, did take some encouragement from the Boehner proposal on taxes with U.S. Treasury prices edging lower, while German 10-year cash yields rose 0.8 basis points to 1.37 percent.
But traders were cautious about reading too much into the latest developments.
"It's important that there's been a shift, so to that extent it's a positive development ... (but) people are now wary of over-interpreting what politicians say," said Marc Ostwald, strategist at Monument Securities in London.
In oil markets investors drew support from a brighter economic outlook for top energy consumer China, although the market remained skittish over the potential impact a failure to reach a budget deal would have on future demand.
"The U.S. economy is on a good track but we need the resolution of the fiscal cliff," said Andrey Kryuchenkov, analyst at VTB Capital. "Until then, from the point of view of investors, let's wait and see when we have a definite solution."
U.S. crude was unchanged at $86.73 a barrel while Brent dipped 0.15 percent to $108.03.
Gold prices were down for a third straight session in line with the softer tone on stock markets.
The precious metal hit a two-week high above $1,720 an ounce last week after the U.S. Federal Reserve pledged to buy $45 billion a month in longer-term Treasuries last week, a potentially inflationary move that was expected to support gold.
But the worries over the fiscal cliff and year-end positioning brought the spot gold down 0.2 percent to around $1,689.50 an ounce.