GLOBAL MARKETS-Shares flat as tensions rise in US budget talks

Thu Dec 20, 2012 12:15pm EST

* Wall Street little changed on 'fiscal cliff' stalemate

* IntercontinentalExchange buys NYSE Euronext for $8 billion

* Oil falls to $110, stalled U.S. fiscal talks dent demand outlook

By Angela Moon

NEW YORK, Dec 20 (Reuters) - Global shares held mostly steady near 17-month highs on Thursday, while oil prices slipped as the latest setback in talks to avert the U.S. "fiscal cliff" kept buyers on hold.

Wall Street stocks traded flat as investors fretted that a budget deal would not come as soon as they had hoped after President Barack Obama threatened to veto a controversial Republican plan.

Global equities had rallied earlier in the week on signs of progress in the negotiations, led by banking and energy shares, which tend to outperform in times of economic expansion.

In U.S. trading, NYSE Euronext surged more than 30 percent to make it the S&P 500's top percentage gainer after IntercontinentalExchange Inc said it would buy the operator of the New York Stock Exchange for $8.2 billion.

NYSE was up 33 percent at $31.96, while ICE shares gave up early gains to fall 1.1 percent to $126.84.

The market barely reacted to a round of strong U.S. data, including an upward revision to gross domestic product growth and stronger than-expected home sales, suggesting the budget issue remains the primary focus for markets.

While investors have hoped for an agreement to come soon over the automatic tax hikes and spending cuts due to take effect in 2013, it seems unlikely as wrangling continues over the details.

The absence of a significant sell-off shows "the market still believes that there will be an announcement of some sort. But as the clock is ticking, the most you're going to get is a stop-gap measure," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"At least in the posturing it looks as if there are ultimatums put on the table, which tends to box either side in," he added.

Worries over the course of events in Washington spread through the commodity markets, stoking concerns about demand from the world's biggest consumer.

Oil fell to $110 a barrel in choppy trading.

Brent crude slipped 31 cents to $110.05 a barrel after settling $1.52 higher in the previous session, the biggest one-day gain since Nov. 19.

The front-month contract tested the 200-day moving average of $110.31 earlier in the session, touching a high for the day of $110.47. U.S. oil fell 24 cents to $89.74, threatening to snap four straight days of gains.

MSCI's world equity index has risen steadily over the past five weeks on optimism that a budget deal would clear the way for stronger growth in 2013. It was steady near 342 points on Thursday, not far from levels last seen in July 2011.

The Dow Jones industrial average was down 6.82 points, or 0.05 percent, at 13,245.15. The Standard & Poor's 500 Index was up 1.20 points, or 0.08 percent, at 1,437.01. The Nasdaq Composite Index was down 3.35 points, or 0.11 percent, at 3,041.01.

In Europe, shares stuttered as indexes approached overbought levels. The FTSEurofirst 300 provisionally closed up 1.01 point at 1,143.14, trading in a tight 4-point range all session, with its 14-day relative strength index - a widely used technical momentum indicator - at 67.5, with 70 and above considered "overbought."

In contrast, U.S. Treasuries prices rose as investors stuck to safe-haven government bonds. Benchmark 10-year Treasury notes rose 4/32, the yields easing to 1.79 percent from 1.80 percent late on Wednesday.

In the currency market, the euro pared gains against the dollar, hitting New York session lows in volatile trading, with no real fundamental driver for the move and thin market conditions tending to exacerbate moves.

The euro touched New York lows of $1.3232. It was last at $1.3239, up just 0.1 percent on the day. [ID: nL1E8NJLGQ]

The yen slipped against the dollar. The scale of asset purchases set by the Bank of Japan disappointed some investors who had positioned for more aggressive easing.

Gold prices fell more than 1 percent to hit the lowest in nearly four months after breaking through a critical support level on charts at $1,661 an ounce, weighed by year-end investor selling.

Spot gold was down 1.08 percent at $1,648.59 an ounce, having hit a low of $1,646.94 after falling through strong support at its 200-day moving average, a closely watched support level.