By Richard Hubbard and Marc Jones
LONDON (Reuters) - The dollar rose and world shares turned lower on Wednesday as investors worried about the outlook for the U.S. and euro zone economies after President Barack Obama's re-election.
Wall Street share futures, which had pointed to a higher open on relief over the clear election outcome, also reversed course as the fiscal problems of the United States and slowdown in Europe returned to haunt investors.
A preservation of the status quo in Washington after a bitter and expensive election campaign raised concerns about prospects for an early solution of the budget deficit problem.
In less than two months, tax cuts enacted under President George W. Bush expire and mandatory spending cuts begin to bite in what has been called a "fiscal cliff" that could crush the U.S. economic recovery.
"People will be refocusing away from the election to more important issues surrounding the fiscal cliff, and given that the status quo prevailed, the question is whether those same politicians will be able to reach a compromise before December 31," said Valentin Marinov, Director of FX Strategy at Citi.
The dollar rose to a two-month high against a basket of currencies of 80.863 and also hit a high of 0.9468 Swiss francs
The MSCI world equity index, which had climbed 0.25 percent in the wake of Tuesday's election, lost this ground as trading progressed to be slightly lower at 331.46 points by midday in Europe.
The U.S. budget issue has already had a significant effect on business investment and spending, leading many in the markets to call for Democrats and Republicans in Congress to find a quick resolution before global growth is damaged.
"On the basis that the U.S. election has resulted in status quo in the White House and in Congress, politicians on both sides should now get on with resolving the issue of the budget deficit reduction," said Richard Lewis, head of Global Equities at Fidelity Worldwide Investment.
Europe's main stock markets were facing their own hurdles from a weakening economic outlook and the unresolved problems facing Greece and Spain.
European Central Bank President Mario Draghi, speaking before Thursday's November policy meeting, said the outlook for the euro zone economy was expected to remain weak and inflation was well contained.
The ECB is set to leave interest rates unchanged, deferring a cut in borrowing costs that would risk undermining the impact of Draghi's bond-purchase plan a year into his ECB presidency.
But his comments followed the release of economic forecasts by the European Commission showing the euro zone economy will barely grow at all next year, though it may pick up in 2014.
The Commission also forecast the Spanish economy would contract 1.4 percent this year, much more than the Madrid government's own prediction.
"At a time when everyone is looking at Spain and wondering when it will ask for a bailout, the Commission is saying that Spain is likely to miss its (budget) targets," said Societe Generale economist Michala Marcussen.
Greece was also rattling investors as the parliament is due to vote later in the day on an austerity package needed to secure a fresh injection of euro zone and IMF aid and avert bankruptcy.
The FTSE Eurofirst 300 index of top European shares was down 0.25 percent at 1,112.01 points, with London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 down between 0.25 and 0.7 percent.
The euro, which touched a high of $1.2876 as the greenback slipped in response to the U.S. election, also lost ground on the weaker economic outlook to be 0.4 percent lower at $1.2750. ]
Benchmark German government bond yields slipped after the Commission published its forecasts to around 1.4 percent, while Spanish and Italian debt was trading broadly steady..
U.S. bond markets took Obama's win largely in their stride. With the Senate still divided, U.S. Treasury futures were about 0.4 percent higher at 133-8/64 points, compared with a high of 133-19/64 seen in Asian trading.
Thirty-year U.S. bond prices gained a point to bring the yield to a low of 2.86 percent, down from 2.92 percent immediately before the election.
Gold, which is seen as a safe haven and protection against future inflation, rose to a two-week high of $1,726.31 an ounce shed some of its gains to be around $1,723.50 an ounce. Growth-sensitive copper fell 0.9 percent while oil slipped 75 cents to near $110 a barrel.
"There's been an Obama bounce, but what's really changed? There are still the problems with the fiscal cliff, and the situation in Europe is still pretty dire," Michael Hewson, an analyst at CMC Markets, said.
(Additional reporting by Simon Falush in London; editing by David Stamp)