By Richard Hubbard
LONDON (Reuters) - The euro hit a two-month low and world share markets fell for a fifth day on Tuesday as a dispute between international lenders threatened to further delay an aid payment to Greece.
Worries about the looming fiscal crisis in the United States, the ramifications of the political transition in China and the outlook for global growth all added to investor concerns, and helped send commodity prices lower.
The MSCI world equity index was down 0.3 percent to 321.80 points by 0930 GMT for a loss of three percent in the past five trading sessions.
Greece's international lenders agreed on Monday to give Athens two more years to meet budget targets but the euro zone and IMF clashed over a longer-term target date to shrink the country's debt pile and no aid was disbursed.
"The IMF and the EU are very much at odds and this is unnerving the markets," said Michael Leister, senior rate strategist at Commerzbank
"There's a lot of haggling with regards to Greece and you know a hard default cannot be ruled out. So tail risks are increasing again."
The FTSE Eurofirst 300 index index of top European shares European shares was down 0.4 percent to 1089.80 points, while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were down by between 0.3 and 0.7 percent.
Euro zone finance ministers are not planning to meet again to discuss Greece until November 20 so the market's immediate focus is on a Treasury bill sale in Athens, needed to refinance a 5 billion euro issue maturing on November 16.
"The Greek T-bill auction is the focus this morning because of its size, but I think it will go OK. These things tend to be purchased by Greek banks," Rabobank rate strategist Lyn Graham-Taylor said.
The euro had dropped 0.3 percent to hit a two-month low of $1.2668, which helped hoist the dollar index to 81.225, a fresh two-month high.
Investors are also waiting for the German ZEW economic sentiment indicator for November, due later, which will give some insight into the extent of the slowdown in Europe's biggest economy for the fourth quarter.
German government bund futures, a traditional target of safe haven demand, jumped 6 ticks higher to 143.31, after earlier setting a fresh two-month high of 143.48.
U.S. stock index futures also pointed to a weaker open on Wall Street where interest is centred on the return of lawmakers to Washington after last week's elections and signs of any progress on dealing with a looming fiscal crisis.
Analysts say a failure to act on a scheduled $600 billion in tax increases and government spending cuts due early next year could tip the United States back into a recession.
S&P 500 futures SPc1 were down 0.5 percent at 1,371 points, Dow Jones industrial average futures dropped 0.7 percent and Nasdaq 100 futures fell 0.5 percent
U.S. Treasuries also reflected the growing concerns that a compromise may be difficult to achieve with 10-year yields falling to 1.582 percent from 1.613 percent on Friday. The U.S. Treasury market was closed on Monday for the Veterans' Day holiday.
Earlier MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1 percent to hit a seven-week low after shares in China and Hong Kong fell sharply on worries over the outlook for the world's second largest economy.
The falls were triggered when China's state media reported that government curbs on the housing market would remain in place, raising fears that the ongoing Communist Party congress would spawn little change in economic policies.
The uncertainty over the euro zone's debt problems and the caution over a U.S. fiscal policy standoff spread across the commodity markets.
U.S. crude futures fell 0.7 percent to $84.99 a barrel and Brent dropped 0.4 percent to $108.58.
"There is plenty of oil and the market is well supplied, but the economic outlook both in the United States and Europe is weak and that's putting downward pressure on prices," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
Gold fell $2.94 to $1,724.80 an ounce, down from a 3-week high of around $1,738 struck on Friday. Despite the recent fall, gold is still up around 10 percent so far this year.
(Editing by Anna Willard)