* 'Fiscal cliff' uncertainty weighs on U.S. stocks
* Euro jumps to 6-week high on Greece optimism
* Treasuries edge up, commodities struggle on world growth
NEW YORK, Dec 4 U.S. stocks edged lower on
Tuesday as investors fretted about Washington's ability to avoid
a year-end budget crisis, but a Greek plan to buy back debt
pushed the euro to a six-week high.
Commodities also struggled as weak U.S. manufacturing data
and tense budget talks stoked worries about the world economy.
Markets fear the United States could slip into recession if
$600 billion in tax hikes and spending cuts are allowed to start
taking effect in January. The White House and Congress have yet
to agree on a long-term deficit reduction plan.
"Investors everywhere are focused on what is happening here
related to the 'fiscal cliff' and the risk that nothing will
happen," said Gail Dudack, chief investment strategist at Dudack
Research Group in New York.
"From what I have seen, there is a consensus that something
will happen. Maybe if it is not ideal, something will happen."
Data this week showed U.S. manufacturing contracted in
November, its worst month in more than three years.
On Wall Street, the Dow Jones industrial average was
down 10.98 points, or 0.08 percent, at 12,954.62. The Standard &
Poor's 500 Index was down 4.05 points, or 0.29 percent,
at 1,405.41. The Nasdaq Composite Index was down 15.24
points, or 0.51 percent, at 2,986.95.
Worries about U.S. lawmakers' inability to compromise on
fiscal issues sapped gains in European shares, with the
FTSEurofirst 300 index nearly flat, retreating from a
World shares as measured by MSCI's all-country equity index
dipped 0.1 percent.
In an interview with Bloomberg Television, President Barack
Obama rejected a Republican proposal to resolve the crisis as
"still out of balance."
The euro, however, remained near a six-week high above
$1.31, boosted by a Greek debt buy-back plan and encouraging
news from Portugal and Spain. Greece's buy-back is a crucial
part of a deal reached last week by international lenders to cut
the country's debt and needs to be completed before the IMF can
release its emergency aid.
"There's some optimism around the Greek buy-back," said Eric
Viloria, senior currency strategist at Forex.com in New York.
"That's seen as sort of the last major risk event for some time.
"Technically, it looks like (the euro) does have some more
room to the upside."
U.S. government bond prices were slightly higher, but most
investors kept to the sidelines in the absence of progress on
the budget negotiations. The benchmark 10-year Treasury
was up 4/32 to yield 1.6062 percent.
"When things are drifting like this, we see some money
gravitating to investment-grade corporate bonds," said Jim
Vogel, interest rate strategist with FTN Financial in Memphis,
Headlines about the back-and-forth proposals by Republicans
and Democrats have monopolized attention on Wall Street, though
many investors still expect a deal before the year-end deadline,
which could trigger a rally.
With the euro zone mood lifting, Spanish, Italian and Greek
bonds rose while German Bunds stayed on the back foot, though
losses were limited by the potential impasse in U.S. budget
Italian 10-year yields fell to 4.40 percent,
while the Spanish equivalent was down at 5.24 percent
, extending Monday's falls after Greece unveiled
better-than-expected terms for the debt buy-back.
Lingering worries about the world economy, though, pushed
oil and gold lower. U.S. crude oil fell 69 cents to
$88.40 a barrel, and gold fell about 1 percent to its
lowest in nearly a month after prices broke below key support
Weaker manufacturing data raised concern about fragile
global growth, which could hurt demand for energy.