U.S. and European stocks fell on Monday after weak Chinese and Japanese data stoked worries about slowing global economic growth, while oil prices sank to five-year lows on expectations of oversupply into 2015.

The euro sagged to 2-1/2-year lows against the dollar after European Central Bank policymaker Ewald Nowotny warned of a "massive weakening" of the euro zone economy and said the purchase of state bonds could provide a boost. His comments came just days after Standard and Poor's downgraded its credit rating on Italy, the bloc's third-largest economy, to a level just above junk status.

Nowotny's remarks raised bets in the bond market for a fresh round of ECB stimulus in the first quarter of 2015.

Data out of Asia and the sell-off in oil took a toll on sentiment.

In energy markets, Brent crude LCOc1 settled down $2.88 or 4.17 percent at $66.19 a barrel, a five-year low, on predictions that oversupply would keep building until next year after OPEC decided not to cut output. U.S. crude futures CLc1 settled down $2.79 a barrel, or 4.24 percent, at $63.05.[O/R]

Japan reported its third-quarter economic contraction was deeper than previously thought, while China's unexpectedly weak import data signaled slowing demand in the world's second- biggest economy.

The disappointing economic developments abroad overshadowed Friday's robust U.S. jobs report, which revived bets the Federal Reserve might consider ending its near-zero interest rate policy in mid-2015.

"I think people are looking at the potential ripple effects from the slide in oil. You're seeing some of these ripple effects today," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, noting there also seems to be profit-taking as year's end draws near.

The Dow Jones industrial average .DJI closed down 106.31 points, or 0.59 percent, at 17,852.48, the S&P 500 .SPX ended 15.06 points, or 0.73 percent, lower at 2,060.31 and the Nasdaq Composite .IXIC finished down 40.06 points, or 0.84 percent, at 4,740.69. [.N]

The FTSEurofirst 300 .FTEU3 ended down 0.7 percent at 1,395.44, while Tokyo's Nikkei .N225 eked out a 0.08 percent gain. [.EU] [.T]

The MSCI world equity index .MIWD00000PUS, which tracks shares in 45 nations, fell 2.88 points, or 0.68 percent, to 421.87.

In the currency market, the euro fell to a more than 2-1/2-year low against the greenback at $1.2247 before rebounding to $1.2309 in U.S. trading EUR=, up 0.2 percent from Friday.

The dollar also retreated against the yen and other major currencies as traders booked some profits on the U.S. currency's recent gains linked to expectations the Federal Reserve might raise interest rates sooner in 2015 than had been expected.

The dollar was down 0.6 percent at 120.71 yen JPY= after striking a seven-year peak of 121.84 yen in Asian trading.

Bets on a fresh round of ECB stimulus in the first quarter of 2015 helped boost prices of U.S. and German government bonds. Benchmark 10-year U.S. yields fell to 2.26 percent US10YT=RR and 10-year Bund yields declined to 0.72 percent DE10YT=RR.

Spot gold prices XAU= edged up 1 percent at $1,204.50 an ounce on some safe-haven demand on the modest losses in U.S. and European equity prices.


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