* World shares slip as Fed hints to tighter policy
* Concerns over U.S. battles to cut spending, raise debt ceiling
* Dollar index extends rally
By Rodrigo Campos
NEW YORK, Jan 3 World stocks dipped on Thursday, reversing course after minutes from the latest Federal Open Market Committee meeting showed rising concern about the Fed's policy of buying bonds to stimulate growth.
The Federal Reserve's minutes also extended a rally in the U.S. dollar, fueled earlier by concerns about more budget wrangling in Washington.
The Fed's asset purchase program has been a main pillar of the equities rally that has extended since 2009 and has catapulted the U.S. benchmark S&P 500 index to near a 5-year high.
The December meeting minutes showed several of the central bank's officials were leaning towards slowing or stopping purchases well before the end of 2013.
"This is somewhat earlier than what the markets would have thought," said Millan Mulraine, senior economist at TD Securities in New York.
"While the evolution in the data, particularly progress in the labor market, will ultimately determine the timing of the end point for purchases, it seems reasonable to assume that the Fed has penciled in some time in 2013 as a natural point to conclude the QE3 program."
Global equities retreated a day after hitting an 18-month high, while the U.S. dollar climbed to a three-week high against a basket of currencies on concerns about another looming fight over spending and taxes in Washington.
The MSCI world equity index fell 0.3 percent after hitting an 18-month high on Wednesday.
The Dow Jones industrial average fell 24.27 points, or 0.18 percent, to 13,388.28. The Standard & Poor's 500 Index lost 3.03 points, or 0.21 percent, to 1,459.39. The Nasdaq Composite dropped 7.17 points, or 0.23 percent, to 3,105.10.
A European equity benchmark ended up 0.45 percent after hitting its highest intraday level since March 2011, boosted by a belated reaction in Swiss stocks due to a holiday.
Data suggesting some momentum in the U.S. economy as the year ended showed private-sector employers stepped up hiring in December, cutting losses in stocks and further supporting the greenback gains.
President Barack Obama and congressional Republicans face two more months of tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought deal to avert the "fiscal cliff" of automatic tax hikes and spending cuts covered only taxes and delayed decisions on expenditures until March 1.
"There's still some clouds over the horizon, with the fiscal issue of the government," said Jeff Meyerson, head of trading at Sunrise Securities in New York. "We don't know how they're going to pan out, but in all likelihood there's not going to be a calamity."