* U.S. stocks fall as fiscal talks set to resume
* Market focus on outcome of Greek aid negotiations
* Euro edges down vs dollar
NEW YORK, Nov 26 (Reuters) - Stocks around the globe and the euro slipped on Monday, with investors cautious about the latest round of talks to release emergency aid to keep Greece financially afloat.
A distinct lack of progress in talks among U.S. lawmakers over how to avoid harsh tax increases and government spending cuts due to start in January also weighed on markets, with Wall Street following the global trend at the open.
Stocks, commodities and the euro were steady or slightly weaker following strong gains over the past week as investors priced in the likelihood of a Greek deal.
"On the most pressing issue for the markets into year end, that of the tax and spending issues in the U.S., the Sunday morning talk shows didn't reveal that we're on the cusp of a deal as more horse trading will go on in the weeks to come," said Peter Boocvkar, managing director at Miller Tabak & Co in New York.
The Dow Jones industrial average was down 89.34 points, or 0.69 percent, at 12,920.34. The Standard & Poor's 500 Index was down 8.60 points, or 0.61 percent, at 1,400.55. The Nasdaq Composite Index was down 7.02 points, or 0.24 percent, at 2,959.83.
The MSCI world equity index, which gained nearly 4 percent over the week to Nov. 23 for its biggest weekly gain since April, was down 0.4 percent at 328.65.
"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 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. It 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 0.5 percent at 106.40 yen, having earlier touched 107.13 yen, the single currency's strongest level since late April.
Against the dollar, the euro was down 0.1 percent at $1.2959 , having hit its highest since late October on Friday.
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 over the outcome and Spanish bonds prices fell.
Benchmark 10-year German bond yields eased two basis points to 1.41 percent, while Spanish 10-year bond yields were last at 5.628 percent.
U.S. Treasury prices also rose on investors' appetite for safe-haven assets. The benchmark 10-year U.S. Treasury note was up 14/32, with the yield at 1.6437 percent.
Major European share indexes were down across the board after some regional indexes had their best weekly performance since December over the past week.
The FTSE Eurofirst 300 index of top European shares surged more than 4 percent last week but then fell 0.6 percent on Monday to 1,103.97.
Earlier, optimism around the euro zone's ability to achieve a deal on Greece lifted MSCI's broadest index of Asia-Pacific shares outside Japan to a two-week high.
Oil prices were also in retreat after their recent gains, but the move was limited by 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.
Brent and U.S. crude futures fell more than $1 on Monday as concerns about Greek debt talks and U.S. budget negotiations kept the specter of dampened oil demand in focus and pressured oil and equities prices.
Brent crude slipped below $111 a barrel while U.S. crude oil futures fell 0.9 percent to $87.51.
Gold fell $4.34, or 0.25 percent, to $1748.10 an ounce after rising to its strongest since Oct. 12 on Friday. Gold has gained around 11 percent this year, mainly due to expectations that U.S. monetary policy will remain loose.