GLOBAL MARKETS-Shares drop; Fed and German election remain key
* Shares hurt by lack of clarity around Fed tapering
* China PMI rises to six-month high
* Merkel sees victory but coalition still needed
* Draghi comments pressure the euro
NEW YORK, Sept 23 (Reuters) - Global equities slid on Monday as nagging uncertainty over the Federal Reserve's policy stance offset an election triumph for German leader Angela Merkel and upbeat euro zone and Chinese data.
The euro took a tumble after European Central Bank President Mario Draghi said euro zone interest rates will remain at current or lower levels for an extended period of time.
"A combination of hearing lots of Fed presidents, and people from Capitol Hill talking will always put investors in a bad mood," said Ron Florance, deputy chief investment officer at Wells Fargo Private Bank in Scottsdale, Arizona. "None of them are providing clarity. They are just providing more uncertainty and angst."
William Dudley, president of the Federal Reserve Bank of New York, said on Monday that the timeline that Fed Chairman Ben Bernanke articulated in June for scaling back the central bank's stimulus measures is "still very much intact."
The Fed surprised financial markets last week by deciding to stick with its program of buying Treasuries and mortgage-backed securities at a monthly pace of $85 billion, as it cited continued risks to the economy.
Two other regional Fed presidents gave speeches on Monday. Richard Fisher, president of the Dallas Fed and a non-voter on policy this year, said last week's unexpected decision on bond-buying hurt the central bank's credibility.
And Dennis Lockhart, president of the Atlanta Fed, warned that America risked "losing its economic mojo" unless lawmakers worked to reverse decline sin labor productivity and new job creation.
The Dow Jones industrial average was down 45.57 points, or 0.29 percent, at 15,405.52. The Standard & Poor's 500 Index was down 8.75 points, or 0.51 percent, at 1,701.16. The Nasdaq Composite Index was down 14.08 points, or 0.37 percent, at 3,760.65.
The pan-European FTSEurofirst 300 were down 0.5 percent at 1,256.11. MSCI's index of world shares was down 0.3 percent.
World and European stocks hit a five-year high last week while the S&P 500 and Dow industrials hit record highs after the Fed kept policy unchanged.
Despite the strong showing by Merkel's conservatives in Germany's general election on Sunday, the party appeared just short of the votes needed to rule on their own, while current coalition partner the Free Democrats suffered a humiliating exit from parliament.
Stock markets also struggled after Friday's comments by a top Fed policymaker who hinted the U.S. central bank may not wait too much longer to phase out its huge stimulus program.
Adding to concerns was the approaching Oct 1 deadline for Congress to avoid a government shutdown as lawmakers negotiate ahead of the end of the fiscal year on Sept. 30. .
The New York Fed's Dudley warned that fiscal uncertainties "loom very large" as Congress prepares to hash out a deal to avoid a government shutdown and raise the nation's debt ceiling. .
The negative sentiment largely offset strong data from Europe. Markit's September euro zone Flash Composite Purchasing Managers' Index jumped to its highest level since June 2011 and beat expectations as new orders hit their fastest pace in over two years.
"We had some good news out of China and Europe and the elections in Germany are favorable for the euro zone, but focus remains on the Fed," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
The euro was down 0.1 percent at $1.3503 after Draghi's comments offset Merkel's win.
But Nick Beecroft, chairman and senior market analyst for Saxo Bank capital markets, said Merkel's election win was "a ringing endorsement" for efforts to preserve the euro.
"The positive thing for the euro is that it is 99 percent certain we will have a grand coalition that will be able to change the (German) constitution if needed to allow euro bonds.
"This won't happen overnight but I expect it to gradually come onto the agenda," he added.
Commodity currencies were bid after a survey showed a promising pickup in Chinese export orders, another sign of stabilization in China, the world's second biggest economy.
The preliminary HSBC Purchasing Managers' Index for China climbed to 51.2 in September, from August's 50.1, with 10 out of 11 sub-indexes up in the month. Dealers had looked for a reading of around 50.9.
The Australian dollar rose 0.5 percent to $0.9444. China alone takes around one-third of all Australia's exports, chiefly commodities such as iron ore, the key raw material for steel.
Shares in Shanghai gained 1.0 percent and Taiwan's main index was up 0.9 percent on the same data.
U.S. Treasuries prices rose on Monday.
The benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 2.7136 percent.
Europe's bond markets were little changed after the German election, with German Bunds and most euro zone periphery debt faltering after a positive start..
In other markets, Brent crude oil was down 1.2 percent at $107.92 a barrel, while U.S. crude was down 1.3 percent at $103.35.
Gold rose 0.1 percent to $1,326 an ounce.
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DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.