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* Wall Street falls after talks on 'cliff' hit wall * European shares, euro retreat on U.S. budget talks * Oil slides on worries failed talks may spark recession * Dollar, government bonds up as safe havens climb By Herbert Lash NEW YORK, Dec 21 (Reuters) - Global stock markets fell on Friday, pushed lower by a drop on Wall Street, and the euro and oil prices also slipped as a new setback in talks to avert a U.S. fiscal crisis and weak data out of Europe put investors on edge. A proposal from Republican leader John Boehner to avoid the so-called fiscal cliff failed to get support from his party late Thursday, casting fresh uncertainty over negotiations to avoid automatic tax hikes and spending cuts in January that could push the U.S. economy back into recession. The three major U.S. equity indices were off about 1 percent, with the markets also weighed down by a poor reading of consumer confidence. Thomson Reuters/University of Michigan Surveys of Consumers' final December consumer sentiment index fell to 72.9 from 74.5 in a preliminary report. Economists in a Reuters survey expected a final December reading of 74.7. "The markets are becoming extremely nervous as time is running out for any compromise solution" in U.S. fiscal negotiations, said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "The greatest fear among investors is that the sudden shock to U.S. aggregate demand caused by the automatic sequestration of government spending and the simultaneous hike in taxes could have a chilling effect on global growth." The Dow Jones industrial average was down 134.67 points, or 1.01 percent, at 13,177.05. The Standard & Poor's 500 Index was down 15.29 points, or 1.06 percent, at 1,428.40. The Nasdaq Composite Index was down 35.47 points, or 1.16 percent, at 3,014.92. Adding to anxiety were weaker-than-expected data from key corners of Europe, as German consumer morale dropped to its lowest in more than a year, Britain revised growth figures lower and Sweden slashed its economic forecasts. The euro fell 0.51 percent to $1.3175. The combined worries prompted widespread selling in most major stock markets and led investors to safe-haven assets. The dollar and yen and U.S. and German Government bonds all rose as declines on equity markets in London, Paris and Frankfurt compounded tumbles in Asia. MSCI's all-country global equity index fell 0.91 percent to 339.48. The FTSEurofirst 300 of leading European shares fell 0.39 percent to 1138.30. At a news conference, Boehner said it was up to President Barack Obama and fellow Democrats in Congress to reach a solution on the fiscal cliff. Bickering U.S. politicians have only 10 days left to resolve their differences. Most observers are still assuming the two sides will avert a fiscal disaster but tensions are likely to intensify over the normally quiet holiday period as the deadline looms. "The markets are likely to interpret this as signaling even tougher negotiations in coming days," Mohamed El-Erian, chief executive of bond giant PIMCO, told Reuters. Oil was also caught up in the U.S. disappointment. Brent crude oil fell $1.17 to $109.03 per barrel, while U.S. oil futures <CLc1) fell $1.61 to $88.52. The benchmark 10-year U.S. Treasury note rose 14/32 in price to yield 1.751 percent.