Stocks give up gains as Fed concerns weigh

The Shanghai Composite Index slid 2.7 per cent to 3,114.80 at the close, paring earlier declines of 4.7 per cent

European shares gave up the day's gains on Monday, the dollar stalled and oil prices fell as investors positioned for a US Federal Reserve meeting later this week that could see interest rates rise for the first time since 2006.

Tepid Chinese economic data was largely shrugged off and stocks rose as much as 1 percent in early European trade, but the momentum gradually faded.

Wall Street looked set to open lower, according to index futures.

The combination of worries about slowing Chinese and global growth and higher US borrowing costs have weighed on markets for weeks, although concern about the potential impact on economic health means many economists see no "liftoff" in US interest rates until next year.

A Reuters poll on Friday showed a small majority of forecasters still expect a Fed hike on Thursday, though markets-based models suggest policy tightening will be delayed.

The pan-European FTSEurofirst 300 index, which earlier gained almost one per cent, was last down 0.2 per cent for the day.

Earlier, data showed growth in Chinese investment and factory output in August lagged forecasts. After weak trade and inflation data last week, this made it more likely that third-quarter economic growth may dip below seven per cent for the first time since the financial crisis. Only retail sales beat forecasts.

Shares fell in China and Japan, although MSCI's main index of Asia-Pacific stocks excluding Japan rose 0.6 per cent.

China's Shanghai Composite index dropped 2.8 per cent and the CSI 300 index of the biggest listed companies in Shanghai and Shenzhen lost two per cent. Tokyo's Nikkei closed down 1.6 per cent.

The dollar hit an almost three-week low against a basket of currencies but the index was last up almost 0.1 per cent.

The greenback dipped 0.2 per cent against the yen, which last traded at 120.32 to the dollar. The euro was down 0.2 per cent at $1.1322.

"Until Thursday I think the dollar will be moved by strategic positioning (and) risk sentiment... rather than fundamental input," said Commerzbank FX strategist Esther Reichelt in Frankfurt. "We have all the information we require so far to have a view on the U.S. dollar and nothing before Thursday is going to change any of that."

In emerging markets, Turkey's lira fell to a record low of 3.069 to the dollar

Oil prices fell more than 1 percent after the Chinese data and on the prospect of dwindling demand, which analysts said was likely to diminish further if US interest rates rise. Brent crude, the global benchmark, was down 57 cents at $47.57 a barrel.

As stocks dropped, core government debt yields reversed course and fell. German 10-year Bunds, the euro zone benchmark, fell one basis point to 0.64 per cent while US 10-year Treasuries yielded 2.18 per cent, unchanged from Friday's New York close.

Copper turned lower in London on worries over China and the Fed. Three-month copper on the London Metal Exchange slipped 1.4 per cent to $5,296.50 a tonne.

Gold fell to just above a one-month low, last trading at $1,105.30 an ounce.