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Stocks decline on China slowdown concern; Brent below $97/bbl

By Caroline Valetkevitch
A man looks at an electronic board displaying Japan's Nikkei average (top C) and the stock price indexes of various countries outside a brokerage in Tokyo September 4, 2014. REUTERS/Issei Kato

By Caroline Valetkevitch

NEW YORK (Reuters) - Concern about a potential economic slowdown in China pressured world stock indexes on Monday while Brent crude oil fell below $97 a barrel on sluggish demand and ample supplies.

Signs of disagreement between major economic powers on the need for extra stimulus further clouded the outlook.

In remarks on Sunday, Finance Minister Lou Jiwei said China wouldn't dramatically alter its economic policy because of any one economic indicator. Analysts' growth forecasts for China have been falling, putting more focus on the country's economic policy.

Investors worried a closely watched gauge of Chinese manufacturing, due on Tuesday, could indicate activity was contracting.

"The China demand story is a new variation of a story we’ve been worried about for a few months. We get some critical data on it tonight for tomorrow morning," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

The Dow Jones industrial average <.DJI> fell 79.6 points, or 0.46 percent, to 17,200.14, the S&P 500 <.SPX> lost 15.34 points, or 0.76 percent, to 1,995.06 and the Nasdaq Composite <.IXIC> dropped 59.73 points, or 1.3 percent, to 4,520.06.

MSCI's global share index <.MIWD00000PUS> was down 0.8 percent, while European shares <.FTEU3> fell 0.6 percent.

In the U.S. Treasuries market, long-dated yields dipped to their lowest in over a week on the view that lingering weakness in U.S. economic data may force the Federal Reserve to maintain a dovish stance on raising interest rates.

Ten-year U.S. Treasury notes were up 3/32 in price to yield 2.57 percent, from a yield of 2.59 percent late Friday. U.S. 30-year Treasury bonds added 6/32 to yield 3.29 percent, from a yield of 3.3 percent late Friday. The yield hit a session low of 3.26 percent, its lowest since Sept. 11.

The dollar softened as other major currencies recovered some ground after 10 weeks of gains by the dollar index <.DXY>. The euro , which traded at nearly $1.40 in May, was slightly higher against the dollar at $1.2830 after touching a high of $1.2867.

The Australian dollar , though, fell half a percent to a seven-month low of $0.8826, reflecting Australia's dependency on Chinese appetite for its natural resources exports.

Brent crude oil fell below $97 a barrel, dropping for the third session in four, as sluggish demand and ample supplies outweighed expectations of a cut in oil output from the Organization of the Petroleum Exporting Countries.

November Brent was off $1.67 at $96.72, while U.S. crude futures were down 85 cents at $91.56.

The closely watched Chinese manufacturing number will be released on Tuesday, as will other global flash business activity surveys for September.

Group of 20 finance ministers and central bank chiefs meeting in Australia at the weekend did little to settle investor nerves. They said they were close to adding $2 trillion to the global economy, but there were signs of disagreement.

(Additional reporting by Nigel Stephenson in London and; Michael Connor and Chuck Mikolajczak in New York; Editing by James Dalgleish and Chizu Nomiyama)