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LONDON, Dec 20 AFP

December 21 2012, 04:43AM

Europe's main stock markets have treaded water, with investors nervous that US leaders have still not agreed on a deal to avert the fiscal cliff, dealers say.

London's FTSE 100 index of leading companies slipped 0.05 per cent to 5,958.34 points on Thursday, while in Frankfurt the DAX 30 edged up 0.05 per cent to 7,672.1 points and in Paris the CAC 40 added 0.06 per cent to reach its highest close of the year at 3,666.73 points.

The Milan market added 0.41 per cent and Madrid shares were flat.

In foreign exchange deals, the euro edged up to $US1.3227, from $US1.3226 late in New York on Wednesday, when it had struck an 8.5-month peak at $US1.3308.

Gold prices slid to $US1,650.50 an ounce on the London Bullion Market, from $US1,665.

Many European shares spent the morning in negative territory, but perked up on the announcement that the US InterContinentalExchange (ICE) will buy transatlantic peer NYSE Euronext for $US8.2 billion ($A7.8 billion) to create the world's biggest market operator.

On Wednesday, European equities had staged a "Santa" rally on hopes of a breakthrough deal to avoid the US fiscal cliff and following news of rebounding German business confidence.

After European markets closed it emerged that little progress had been made in the talks to avoid the so-called fiscal cliff of huge tax hikes and deep spending cuts that comes automatically into effect on January 1 unless US lawmakers agree on other measures.

"The Christmas rally so far has been fuelled purely on the expectation that there will be a deal on the fiscal cliff in the US ahead of the festive break next week that is rapidly approaching," said Capital Spreads boss Angus Campbell.

"Yesterday a spanner was thrown in the works and it looks like negotiations have taken a backward step," he said.

Wall Street stocks were also mixed in midday trade on Thursday, as traders shrugged off an upward revision in US economic growth and focused on concerns about the fiscal cliff.

Official data showed the US economy grew 3.1 per cent in the third quarter, faster than previously estimated, but analysts said underlying economic activity remained fragile.

The Dow Jones Industrial Average slid 0.06 per cent to 13,244.11 points.

The broad-market S&P 500 added 0.06 per cent to 1,436.65 points, while the tech-rich Nasdaq Composite shed 0.09 per cent to 3,041.53 points.

With less than two weeks to go before the fiscal cliff of huge tax hikes and deep spending cuts is due to take effect, US lawmakers have still not reached a compromise budget deal to cut the nation's deficit with less painful measures.

Asian markets traded mixed on Thursday following big gains in the previous session.

The yen slipped against the euro and dollar after Japan's central bank unveiled more huge monetary easing but it held on to earlier gains as traders had mostly expected the new measures.

Tokyo fell 1.19 per cent on profit-taking after surging to an eight-month high on Wednesday.

But Seoul closed 0.32 per cent higher, with the election of conservative Park Geun-hye seeming to have little effect, although dealers were broadly happy as she favours stability over big change.

Shanghai gained 0.28 per cent, Sydney was up 0.35 per cent and Hong Kong staged a late rally to end 0.16 per cent higher.