GLOBAL MARKETS-Stocks slide on Fed taper view; euro higher

* U.S. budget deal could boost Fed taper expectations

* World equity index slips 0.61 percent

* Euro climbs to 6-week high against dollar; yen gains

By Wanfeng Zhou

NEW YORK, Dec 11 (Reuters) - Stock markets worldwide slipped

on Wednesday after the U.S. Congress announced a provisional

budget deal, which heightened expectations of a stimulus

reduction by the Federal Reserve.

The dollar fell against the euro for a seventh straight

session, with the common currency boosted by higher money market

rates and diminishing expectations of imminent easing by the

European Central Bank.

While the U.S. budget deal removed a key uncertainty hanging

over markets by ending three years of impasse and fiscal

instability in Washington, some expect it will strengthen a view

that the Fed may soon start to scale back its $85

billion-a-month stimulus.

"Right now, the market is sort of taking all this in. All

eyes are on any (Fed) tapering in December and while the deal

removes some political uncertainties, it makes tapering more

possible," said Karyn Cavanaugh, market strategist with ING U.S.

Investment Management in New York.

The to-and-fro over when the Fed will begin to halt the flow

of cheap dollars has dominated trading worldwide for months. A

recent run of strong U.S. data and talk from policymakers have

bolstered expectations the process will start soon.

The MSCI world equity index, which tracks

shares in 45 countries, slipped 0.6 percent.

The Dow Jones industrial average dropped 71.03

points, or 0.44 percent, to 15,902.10. The Standard & Poor's 500

Index lost 9.67 points, or 0.54 percent, to 1,792.95. The

Nasdaq Composite Index fell 21.13 points, or 0.52

percent, to 4,039.36.

"It certainly does appear that a window of opportunity could

be opening up for the Fed to act next week without a sharp

market reaction, said CMC Markets strategist Michael Hewson.

"The only question remaining is as to whether they will avail

themselves of it."

Most Asian share markets had lurched lower overnight as

investors booked profits on a range of once-crowded positions.

European stocks slipped 0.09 percent.

Euro zone countries edged closer to agreeing a long-awaited

plan to close ailing banks and at least partly share the costs

involved.

The euro rose 0.1 percent to $1.3770, having hit a

six-week high of $1.3798. The dollar lost 0.3 percent to 102.55

yen. The dollar index, which tracks the U.S.

currency against a basket of six major currencies, was little

changed on the day.

With the euro zone making progress and the European Central

Bank looking increasingly inclined to sit on its hands, the euro

could well top the $1.3832 high of the year so far, said Societe

Generale FX strategist Alvin Tan.

"I'm afraid this euro squeeze is going to continue," Tan

said. "The liquidity conditions are definitely tightening.

U.S. Treasuries prices slipped as investors pared bond

holdings before a $21 billion auction of 10-year notes, the

second leg of a three-part $64 billion sale of government debt

this week.

The benchmark 10-year note fell 9/32 in price to

yield 2.828 percent.

The Federal Open Market Committee, the U.S. central bank's

policy setting group, will convene next Tuesday and Wednesday.

The Fed will begin trimming its monthly asset purchases in

March but some economists are warming up to the idea that it

will do so as early as this month or at the January policy

meeting, a Reuters poll showed on Monday.

Despite the expected tapering, an actual rate hike remains a

distant prospect. Eurodollar and Fed fund futures have not fully priced in a first rate rise until the end

of 2015.

Oil edged lower, shrugging off forecasts of surging global

demand from the west's energy watchdog, while the market awaited

U.S. data, expected to show a drop in crude stockpiles.

Brent crude oil was down 43 cents at $108.95 a

barrel. U.S. crude futures for January delivery were 76

cents down at $97.75.

Gold (Other OTC: GDCWF - news) fell from a three-week high to $1,256 an ounce.

Among emerging markets in the spotlight, a rise in tensions

in Ukraine saw the cost of insuring the country's debt head

towards a four-year high.

Scores of riot police moved against demonstrators during the

night, triggering fears among opposition leaders that they would

crush a protest over Yanukovich's decision to spurn an EU trade

deal and move Ukraine further into Russia's orbit.