Turkish assets weaken,Dogan begins tax-fine talks

* Turkish stocks, bonds, lira fall

* Dogan Yayin begins tax fine talks with Ankara

ISTANBUL, Nov 24 - Turkish assets weakened on Tuesday as investors found little supportive domestic news and awaited the start of settlement talks between the media group Dogan Yayin <DYHOL.IS> and the government on a record tax fine.

The talks, scheduled for 1400 and expected to finish late on Tuesday, will be a key indication of the fate of the crippling 4.8 billion lira tax fine, which upped the stakes between Turkey's biggest media group and Prime Minister Tayyip Erdogan's government in a long-running feud.

Dogan Yayin said on Tuesday it would proceed with its legal challenge to the fine if it failed to reach a deal in the talks. Its shares rose 1.49 percent to 1.36 lira.

A technical fault suspended trading on the stock exchange at 0815 GMT, at which point the index <.XU100> traded down 0.82 percent at 45,427.69 points.

Shares have fallen almost 11 percent in the last month, but are still up some 70.5 percent since the start of 2009.

Tensions between the ruling Islamist-rooted AK Party and the secular judiciary over allegations of illegal wiretapping have hit sentiment in the last weeks. Investors are particularly sensitive to such discord as economic recovery in Turkey has failed to materialise at the pace some had hoped.

"After a strong recovery in the world equity markets this year, regional markets have begun to mildly decouple based on their specific stories, expectations on the pace of the economic growth in 2010, etcetera," Tera Brokers wrote in a note.

"Turkish equities have also decoupled in the recent days and did not move in tandem with global peers. We expect this situation to linger for a little while longer. Unfortunately, for the short term, the driving forces to carry equity index higher are weak in Turkey, in our opinion."

The lira <IYIX=> traded at 1.500 against the dollar on the interbank market, down from Monday's close of 1.496. The yield on the Aug. 3, 2011, benchmark bond <0#TRTSYSUM=IS> rose to 8.91 percent from a previous close of 8.81 percent.

It had dropped as low as 7.59 percent in October, but has since risen on expectations the central bank's steep rate-cutting cycle is coming to an end.

In its financial stability report published on Tuesday, the central bank reiterated comments made at its last rate-setting meeting that economic recovery in Turkey would be slow and gradual. ((alexandra.hudson@reuters.com; Telephone: +90 212 350 7062; Reuters Messaging: alexandra.hudson.reuters.com@reuters.net))