NEW YORK, June 12 (Reuters) - A setback in Greek debt talks weighed down U.S. and European shares Friday, with investors also fretting that sturdy U.S. data may accelerate the timing for a hike in interest rates, while oil prices fell on concerns production may rise further.
The International Monetary Fund raised the stakes in Greece's stalled debt talks Thursday, as its delegation left negotiations because of "major differences" with Athens.
European and Greek politicians said on Friday talks would continue in a bid to reach a deal by June 18, but for traders, it dented optimism about a debt agreement.
"People are worried about a Greek default and that isn't helping stocks," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
EU officials have held their first formal talks on the possibility of a Greek default, officials said Friday, but the darkening outlook failed to fluster Prime Minister Alexis Tsipras, who holed up with his negotiators after proclaiming optimism at an open air concert.
"You have to question whether (the Greeks are) looking at reality. If the IMF sends their negotiators home and
the rest of the EU is talking like this isn't happening it may be political rhetoric aimed at the Greek citizens," said Sampson.
Meanwhile, a U.S. consumer sentiment survey and production data, after strong retail sales data Thursday, gave a rosy view of the U.S. economy ahead of the Federal Reserve June 17 policy statement, which may provide clues on the timing of the first U.S. rate hike in nearly a decade.
"Both of these led the market, coupled with yesterday's report, to think that the first hike from the Fed could be closer," said Samson adding that lift-off could be closer
to the fall than her previous expectation for year-end.
Wall Street was lower in afternoon trading.
At 2:32 p.m. ET (1832 GMT), the Dow Jones industrial average fell 155.38 points, or 0.86 percent, to 17,883.99, the S&P 500 lost 15.73 points, or 0.75 percent, to 2,093.13 and the Nasdaq Composite dropped 30.79 points, or 0.61 percent, to 5,051.72.
OIL PRICE DROPS
Oil fell for a second straight day as investors took profit after Saudi Arabia said it was ready to raise production to record highs, adding to worries over global oversupply.
Brent crude oil for July fell $1.27 to $63.84 a barrel, while U.S. crude settled down 81 cents to $59.96.
U.S. Treasuries yields fell as lower stock prices and concerns about a Greek default spurred safe-haven demand for U.S. government debt ahead of the Fed policy meeting next week.
The University of Michigan's preliminary June read on consumer sentiment came in at 94.6, up from the final reading of 90.7 the month before and above the median forecast of 91.5 among economists polled by Reuters.
U.S. producer prices in May recorded their biggest increase in more than 2-1/2 years as the cost of
gasoline and food rose, suggesting that an oil-driven downward drift in prices was nearing an end.
The dollar index edged down 0.08 percent in choppy trading against a basket of currencies on Friday.
MSCI's all-world country index fell 0.5 percent but was on track for its first weekly gain out of four.
The pan-European FTSEurofirst 300 index fell 1.3 percent, while the euro added 0.12 percent against the dollar and was on track to climb for a second straight week. (Additional reporting by Tanya Agrawal in Bengaluru and Richard Leong in New York; Editing by Bernadette Baum)