* U.S. debt, budget talks suspended * Dollar pares gain, U.S. stocks edge lower * U.S. Treasuries prices slip * Europe data shows signs of strength By Caroline Valetkevitch NEW YORK, Oct 15 (Reuters) - U.S. short-term bill rates rose and stocks slid on Wall Street as U.S. Senate fiscal negotiations were suspended, making prospects for an agreement to end the U.S. government's budget and debt impasse less promising. The uncertainty surrounding the U.S. debt ceiling has led to a substantial selloff in short-term U.S. Treasury bills. The Treasury's weekly auctions of three- and six-month bills drew below average demand as investors become increasingly concerned about the chances of a delayed or missed coupon payment. The value of bids received for the sales over those accepted was the lowest since 2009. For analysis on debt sales, see The U.S. political standoff initially showed signs of giving way to a Senate deal to reopen federal agencies and prevent a damaging default on federal debt. The deadline to lift the U.S. debt ceiling is Oct. 17. Factbox on default risks Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended talks on Monday with Reid saying they had made "tremendous progress." But U.S. Senate negotiations to lift the debt limit and repopen the U.S. government, which has been in a partial shutdown since Oct. 1, were suspended Tuesday afternoon until House Speaker John Boehner works out a fiscal plan that can proceed in the U.S. House, according to Sen. Richard Durbin. "The odds that there won't be a deal over the next month are near zero, but there is some chance we won't see something by the 17th. If that happens ... we could easily correct 3-5 percent," said Jim McDonald, who helps oversee $803 billion as chief investment strategist at Chicago-based Northern Trust Global Investments. The Dow Jones industrial average was down 111.64 points, or 0.73 percent, at 15,189.62. The Standard & Poor's 500 Index was down 10.59 points, or 0.62 percent, at 1,699.55. The Nasdaq Composite Index was down 19.39 points, or 0.51 percent, at 3,795.89. MSCI's world equity index, which tracks shares in 45 countries, was down 0.1 percent, giving up earlier gains. In Europe, the FTSEurofirst 300 ended up 0.9 percent. In the U.S. Treasury bill market, trading was choppy, with rates on Treasury bills maturing soon after Oct. 17 the most sensitive to the back and forth in Washington. Earlier, Treasury rates on T-bill issues due in October to November had fallen to their lowest level in a week, although they remained elevated compared with three weeks ago. Even though the securities sold would not mature for another three- and six months, the Treasury's weekly auctions of three- and six-month bills on Tuesday drew demand that was "way below the average over the past few months" with the value of bids received over those accepted the lowest since 2009, said Stone & McCarthy Research Associates analyst Cathy Guo. The one-month Treasury bills due on Nov. 7 are the most sensitive to efforts to raise the statutory $16.7 trillion borrowing limit. The benchmark 10-year U.S. Treasury note was down 12/32, the yield at 2.7258 percent. DOLLAR HIGHER The dollar pared earlier gains, which came on optimism over possible progress in Washington. The dollar index was last up 0.3 percent at 80.512 after touching its highest since Sept. 18. The euro was down 0.3 percent on the day after touching a two-week low of $1.3478. In Europe, an unexpected rise in German analyst and investor sentiment lifted the outlook for the region's largest economy. The influential ZEW Institute's monthly poll of economic sentiment rose to its highest level since April 2010 and beat a Reuters poll forecast for no change. A separate report on price pressures in Britain showed inflation was higher than expected in September and house prices had risen sharply, adding to doubts over how long the central bank can hold down interest rates.