NEW YORK World stock markets eased on Monday after weak Japanese economic data added to the latest reports showing a slowing global economy, while the euro rose as investors exited bearish bets against the common currency.
European shares posted their worst day in more than a week and U.S. stocks snuffed a six-day rally for the S&P 500 after Japan reported its gross domestic product expanded just 0.3 percent in the second quarter.
Japan's growth was half the expected rate, raising doubts about the global economy while highlighting the impact of Europe's debt crisis on world demand.
In another sign of potential slowing demand, Chinese customs data showed output of refined copper dropped 6.8 percent in July from record high production the previous month. Chinese copper consumption is considered an economic bellwether.
The Dow Jones industrial average .DJI closed down 38.52 points, or 0.29 percent, at 13,169.43. The Standard & Poor's 500 Index .SPX fell 1.76 points, or 0.13 percent, to 1,404.11. The Nasdaq Composite Index .IXIC rose 1.66 points, or 0.05 percent, to 3,022.52.
Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, said she was still cautious over the potential for Europe's debt crisis to blindside the market. She said she would close monitor data to see if improvement in the U.S. labor market would continue.
"I'm not sure we will get out of the summer without a pullback," Sampson said.
Traders are seeking direction, with the S&P 500 hovering not far off its highest level in more than four years. Recent equity gains have been driven by hopes for further central bank easing amid signs of global economic weakness.
The CBOE Volatility Index .VIX, a gauge of investor angst, closed at a five-year low. The index typically moves inversely to the broad market, suggesting investors are not overly concerned about the outlook for equities. But VIX futures suggest additional volatility down the road.
In Europe, the FTSEurofirst 300 index .FTEU3 closed down 0.4 percent at 1,094.74 - its biggest intraday fall since ending down 1.2 percent on August 2.
The euro rose against the dollar for the first time in four days as investors pared bearish bets. But doubts about the ability of the European Central Bank to rein in the region's debt crisis kept pressure on the currency.
Still, sterling fell against the euro on expectations that UK data due this week will bolster the case for more monetary stimulus from the Bank of England to support a flagging economy.
The euro remained below a one-month high hit last week in thin trade.
The euro was up 0.39 percent at $1.2337 and the U.S. dollar index .DXY was down 0.18 percent at 82.406.
"The euro is well below the highs of last week and today we are seeing some short-covering, but the move today is generally uninspired in a lackluster session," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
Short-covering entails buying the euro to close bets that the currency would fall.
Many analysts expect the euro to tread water until September 12, when the German constitutional court is slated to deliver its verdict on the euro zone rescue fund and the fiscal pact for budget discipline.
Oil prices rose in choppy trade to hit a three-month peak on concerns about North Sea supply and Middle East tensions, but fears about slowing growth checked gains.
Brent pared gains and U.S. crude turned lower on the Japanese data and worries of slower global growth.
Brent crude settled up 65 cents at $113.60 a barrel.
U.S. crude for September delivery settled at $92.73 a barrel, down 14 cents.
U.S. Treasuries rebounded in late trading, pulled up by investors who were drawn to higher yields caused by a dramatic sell-off earlier this month.
The benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 1.6607 percent.
Copper fell for a fourth straight trading session as worries about global economic weakness dented the outlook for industrial metals demand.