* U.S. stocks fall after Reid comments * European shares edge down after return from holiday * Yen hits 2-year low as monetary easing eyed By Caroline Valetkevitch NEW YORK, Dec 27 World stocks and the euro turned lower on Thursday following comments from the U.S. Senate majority leader that the economy may be poised to go off the "fiscal cliff," while the yen hit a two-year low on expectations a new government in Tokyo will push for aggressive monetary stimulus. Democrat Harry Reid criticized Republicans for refusing to go along with any tax increases as part of a U.S. budget remedy and said the economy seemed to be heading over the "fiscal cliff" of impending tax hikes and spending cuts. Economists warn that the $600 billion in higher taxes and spending cuts set to kick in from January could push the world's largest economy into recession, dragging other countries with it. U.S. stocks fell to session lows after Reid's comment, while world stocks dipped into negative territory and the euro turned negative against the U.S. dollar. On Wall Street, the Dow Jones industrial average was down 99.38 points, or 0.76 percent, at 13,015.21. The Standard & Poor's 500 Index was down 12.03 points, or 0.85 percent, at 1,407.80. The Nasdaq Composite Index was down 20.46 points, or 0.68 percent, at 2,969.69. The MSCI global index was down 0.3 percent, while European shares were off 0.04 percent as trading resumed after the Christmas holiday break. "Unfortunately, a term all of us are sick of hearing - the 'fiscal cliff' - appears to be dominating all aspects of the financial market and consumer confidence," said Joe Heider, principal at Rehmann Financial in Cleveland, Ohio. EURO DIPS, YEN SLUMPS The dollar rose to 85.92 yen, its highest since August 2010. It was last up 0.4 percent on the day at 85.91 yen with option barriers cited at 86 yen and stop-loss buy orders above 86.10 yen. Investors accelerated their yen sales after Prime Minister Shinzo Abe said his newly formed government would pursue a bold monetary policy, a flexible fiscal policy and a growth strategy to encourage private investment. The yen has fallen roughly 10.5 percent versus the dollar in 2012, its biggest annual drop since 2005. At the same time, Japan's benchmark Nikkei is now up 22 percent for the year. "Yen weakness, based on expectations that the new Japanese government will succeed in driving the dollar to 90 yen with a combination of more aggressive monetary and fiscal policy, is offering support to other currencies," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. The euro touched New York lows of $1.3214 following Reid's comments. It last stood at $1.3215, flat to slightly lower on the day. The euro tends to benefit when U.S. budget negotiations run smoothly, but when there are snags, investor flows go into the safe-haven and highly liquid dollar. U.S. BONDS TURN POSITIVE Prices on longer-dated U.S. Treasuries turned positive after the Reid comments. The bond market began trimming its decline earlier on data that showed a bigger-than-expected drop in American consumer confidence in December, spurring worries about flagging consumer spending causing a U.S. recession. Benchmark 10-year Treasuries prices were 10/32 higher in price, yielding 1.7147 percent, compared with being down by 2/32 before the confidence data and Reid's remarks.