* European shares 0.6 pct lower after five days of gains
* Market focus on outcome of Greek aid negotiations
* Euro edges down vs dollar, off from 7-mth high vs yen
* U.S. stocks seen lower as U.S. fiscal talks set to resume
By Richard Hubbard
LONDON, Nov 26 (Reuters) - World shares and the euro edged
lower on Monday as investors nervously awaited the outcome of
the latest round of talks to release emergency aid to keep
Greece financially afloat.
A lack of progress in talks among U.S. lawmakers over how to
avoid the harsh tax increases and government spending cuts due
to come into effect Jan. 1, was also weighing on markets, with
Wall Street set for a lower open when trading resumes.
Stocks, commodities and the single currency were all either
steady to slightly weaker following strong gains seen over the
past week as investors priced in the likelihood of a Greek deal.
The MSCI world equity index, which gained
nearly four percent over the week to Nov. 23 for its biggest
weekly gain since April, was down 0.1 percent to stand at 329.50
"Last week was very good for the markets and it seems that
investors are taking a breather ahead of the euro zone meeting,"
said Koen De Leus, senior economist at KBC in Brussels.
Euro zone finance ministers and the International Monetary
Fund began their third meeting in as many weeks on Monday to try
to seal a bailout deal for Greece, but must still agree how to
cut the country's debt pile to a more sustainable level.
Greece, where the euro zone's debt crisis erupted in late
2009, is the currency area's most heavily indebted country,
despite a big "haircut" this year on privately-held bonds and
needs the funds to meet upcoming debt repayments.
"There is some caution, but it is also clear that Greece's
lenders will not allow the country to fail. A Greek default is
not an option," De Leus said.
French Finance Minister Pierre Moscovici, speaking on Sunday
after a weekend teleconference of Greece's international
lenders, said the gap had closed significantly, and he believed
a deal could be reached quickly.
The euro was down 0.4 percent at 106.60 yen,
having hit 107.135 yen in Asian trade, the single currency's
strongest level since late April.
Against the dollar, the euro was down 0.1 percent at $1.2965
, having hit $1.2991 on Friday, its highest since late
Big gains for Catalan separatists in regional Spanish
elections also hurt the euro, even though the result fell short
of the convincing win needed to mount a push for a referendum on
independence for the region.
There was a bigger impact from the Spanish vote in the fixed
income market where safe-haven German debt prices recovered some
ground lost last week on concern at the outcome and Spanish
bonds prices fell.
Benchmark 10-year German bonds eased two basis points 1.42
percent, while Spanish 10-year bond yields edged 3
basis points higher to 5.67 percent.
Major European share indexes were down around 0.5 percent
across the board after some regional indexes had seen their best
weekly performance since December over the last week.
The FTSE Eurofirst 300 index of top European shares
surged over four percent last week but was about 0.7 percent
lower on Monday at 1,103 points.
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX were all between 0.4 to 0.9 percent
Earlier, optimism around the euro area's ability to achieve
a deal on Greece lifted the MSCI's broadest index of
Asia-Pacific shares outside Japan up 0.2 percent
to a two-week high.
Oil prices were also in retreat after their recent gains,
but worries over supply from the Middle East as violence flared
in Egypt and hopes an aid deal for Greece would brighten the
outlook for demand limited the move.
Brent crude fell 33 cents to just over $111 a barrel
although it is up around 2 percent so far this month.
U.S. crude oil futures fell 0.6 percent to $87.75.
Carsten Fritsch, senior oil analyst at Commerzbank in
Frankfurt, said the concerns over what was happening in Cairo
was due to Egypt's role as a pivotal power in the Middle East
and North Africa.
"If it is getting messy there, it could spill over into
other countries - oil producers in North Africa and even into
the Gulf and even countries like Saudi Arabia," Fritsch said.
Gold shed 0.15 percent to $1,750.40 an ounce after rising to
$1,754.10 on Friday, its strongest since Oct. 12.
Gold has gained around 11 percent this year, mainly due to
expectations that U.S. monetary policy will remain loose.