Global stocks, oil decline as Japan slips into recession

By Herbert Lash

NEW YORK (Reuters) - Global equity markets and oil prices fell on Monday after news that Japan unexpectedly slipped into recession in the third quarter renewed concerns about the global economy.

The Japanese yen steadied against the U.S. dollar, pulling back from a fresh seven-year low, as the news set the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call an election two years before he has to.

Japan's economy shrank an annualized 1.6 percent, after a 7.3 percent drop in the second quarter, when a sales tax hike hit consumer spending. Analysts polled by Reuters had expected 2.1 percent growth in the third quarter, but consumption and exports remained weak, saddling companies with big inventories.

Brent oil initially fell more than $1 toward $78 a barrel, as Japan is the world's No. 4 crude importer.

Tokyo's Nikkei index lost 3 percent, its biggest one-day drop since August, while shares in Europe and a gauge of world equity markets eased. Wall Street was little changed.

"Japan took the markets by surprise and it is weighing, but I don't see a major reversal, just a market consolidating," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

MSCI's all-country world equity index, which tracks shares in 45 nations slipped 0.25 percent to 419.26. The FTSEurofirst 300 index of top European shares rebounded, up 0.5 percent at 1,350.91.

The Dow Jones industrial average was down 5.36 points, or 0.03 percent, at 17,629.38. The Standard & Poor's 500 Index was down 2.01 points, or 0.10 percent, at 2,037.81. The Nasdaq Composite Index was down 18.24 points, or 0.39 percent, at 4,670.30.

Brent crude fell $1.05 cents to $78.36 a barrel, after dipping as low as $77.94 a barrel earlier in the session. U.S. crude for December delivery was 86 cents lower at $74.96 a barrel.

The dollar was last at 116.41 yen, or 0.12 percent higher, after earlier rising as high as 117.04 yen.

The dollar also gained against the euro after a European Central Bank Executive Board member said the bank could theoretically extend purchases to gold, shares, exchange-traded funds or other assets if more action is needed to stimulate the region's economy.

The euro was last at $1.2461, down 0.48 percent.

U.S. Treasury debt prices fell in choppy trading as investors took profits on gains fueled by the weak Japanese data.

Benchmark 10-year U.S. Treasury notes were last down 5/32 in price to yield 2.3381 percent.

(Reporting by Herbert Lash; Editing by Dan Grebler)