The euro retreated from a three-week high and world stocks fell after six days of gains on Tuesday as the latest setback in efforts to restructure Greek debt triggered fresh worries about a messy default for the country.

Oil and gold prices also fell, with gold following the euro's lead.

Euro-zone finance ministers rejected as insufficient an offer made by private creditors to help restructure Greece's debt, sending negotiators back to the drawing board.

Without aid, Athens will not be able to pay back 14.5 billion euros in maturing bonds in March, which would trigger a difficult default that would hurt the euro zone's financial system and potentially hit the global economy.

Investors have been on edge for months over the implications of a messy Greek default and worries about the larger euro-zone debt crisis, resulting in market volatility.

Everyone from rating agencies to investors are losing patience with Greece and coming to the realization that a resolution to the country's debt troubles may not be reached until the eleventh hour when a deal is put together haphazardly, said Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey.

The euro slipped 0.04 percent against the dollar to $1.302, after notching a three-week high on Monday.

It was well off the day's lows, and analysts said the euro may be positioned for a pause after a strong short-covering rally this past week.

The MSCI world equity index <.MIWD00000PUS> shed 0.4 percent to 314.92, ending a six-day winning streak, while the benchmark U.S. S&P 500 index edged lower after five days of gains. The world equity index still is up 5.2 percent since the start of the year.

The setback in talks over Greece's debt overshadowed data indicating Europe's economy may avoid recession.

Markit's Flash Eurozone Purchasing Managers' Composite Index (PMI), a reliable indicator of overall economic performance, showed the euro zone's economy grew in January for the first time since August, confounding forecasts for a contraction.

On Wall Street, earnings from a number of blue-chip companies -- including McDonald's Corp , DuPont and Johnson & Johnson -- disappointed investors, adding to the bearish mood.

The Dow Jones industrial average <.DJI> slipped 33.07 points, or 0.26 percent, to end at 12,675.75. The Standard & Poor's 500 Index <.SPX> dropped 1.35 points, or 0.10 percent, to 1,314.65. But The Nasdaq Composite Index <.IXIC> rose 2.47 points, or 0.09 percent, to close at 2,786.64.

The situation in Greece has raised concerns and the market has pulled back, but I don't think it is impacting the market as much as before, said Doug Cote, the chief market strategist at ING Investment Management.

Solid quarterly earnings at both McDonald's and J&J were overshadowed by worries about the companies' outlooks. Shares of McDonald's, which have recently been on a tear, shed 2.2 percent to $98.75. J&J shares ended flat at $65.

DuPont's stock edged up 0.1 percent to $49.41, reversing earlier losses after the company's quarterly revenue missed estimates. A sharp drop in demand for DuPont, especially for solar and electronic materials, offset higher prices.

The U.S. earnings period appears to be off to a weaker-than-usual start, with the percentage of companies beating estimates so far at 58 percent, down sharply from comparative performances at this point in the earnings cycle in recent reporting periods.

While the outlook for the U.S. economy has been better than that of Europe, the United States still suffers from high unemployment. Investors will listen closely to what U.S. President Barack Obama says about initiatives on jobs, taxes and housing in his State of the Union address on Tuesday evening.

In overseas stock markets, an index of European stocks <.FTEU3> fell 0.3 percent.


Brent crude oil prices declined as investors focused on the likely repercussions of any Greek default on the global economy and the demand for energy.

ICE Brent crude for March delivery settled at $110.03 a barrel, dipping 55 cents, or 0.50 percent.

Gold fell after hitting a six-week high in the previous session as the euro paused its recent rallies.

Spot gold slid 0.7 percent for the day to $1,665.10 an ounce.

In the U.S. Treasury market, prices of 10-year notes were little changed. Strategists said the market was basically on hold until the results of the Federal Reserve's policy meeting are released on Wednesday afternoon.

The benchmark 10-year Treasury note dipped 3/32 in price with the yield at 2.07 percent, up slightly from 2.06 percent late on Monday.

A lot of people are just waiting to see what exactly the Fed says and what comes out, just because there are so many possibilities, said Gennadiy Goldberg, interest-rate strategist at 4Cast, Inc.

The Fed began a two-day meeting on Tuesday, its first of 2012. On Wednesday, the policy statement and news conference by Fed Chairman Ben Bernanke that are to follow the meeting's conclusion will mark the start of a new practice of announcing policymakers' interest-rate projections.

Many market participants also see a chance that the Fed will announce a specific inflation target. But no one can guess exactly how the Fed will communicate these new pieces of information.

In addition, the Treasury auctioned $35 billion of two-year notes, the first of three auctions this week in which the Treasury will offer $99 billion in new debt.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Julie Haviv, Angela Moon and Emily Flitter in New York; Editing by Jan Paschal)