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Blue chip stocks on Wall Street dropped to their lowest in a month after a sluggish factory report signalled the economic recovery was losing momentum.
Manufacturing activity contracted for the third straight month in August, the Institute for Supply Management said. The ISM index fell slightly to 49.6 in August from 49.8 in July while consensus forecast was for a rise to 50.2.
The Dow Jones Industrial Average closed 54.90 points, or 0.4%, lower at 13,035.94. The Dow hasn't finished below 13,000 since early last month.
The S&P500 index was down 0.1% to 1404.94, while the Nasdaq Composite was up 0.3% to 3075.06.
Other markets: Europe, Asia down
European stocks fell ahead of this week's European Central Bank policy meeting and after Moody's Investors Service cut its outlook on the European Union's credit rating.
The benchmark Stoxx Europe 600 index fell 1.1% to 265.43. Spain's IBEX 35 index closed up 0.7% at 7488.20 as bond rates fell.
But other national markets declined as investors pared back their expectations. The UK's FTSE 100 dropped 1.5% to 5672.01, Germany's DAX fell 1.2% to 6932.58 and France's CAC 40 slipped 1.6% to 3399.04.
Asian markets softened and the Shanghai Composite hit a fresh 3½-year low on disappointment over the absence of fresh monetary easing after a further fall in manufacturing output.
The index shed 0.8%, its fourth loss in five sessions, to end at 2043.65, while Hong Kong’s Hang Seng Index lost 0.7% to 19,429.91.
Australia's S&P ASX 200 dropped 0.6% at 4303.50 as the Reserve Bank of Australia predictably didn't change interest rates.
In Japan, the Nikkei Stock Average edged down 8.38 points, or 0.1%, to 8775.51.
Commodities: Oil down, gold hits $US1700
Crude-oil futures fell along with declines in broader markets. Light, sweet crude for October delivery settled $US1.17, or 1.2%, lower at $US95.30 a barrel in New York after trading as high as $US97.37.
Brent crude on the ICE futures exchange traded $US1.37 lower at $US114.41 a barrel.
Gold futures briefly ticked above $US1700 an ounce for the first time in nearly six months.
The most actively traded contract, for December delivery, was up $6.30, or 0.4%, at $US1691.60 in New York.
Currencies: US dollar goes higher
The US dollar traded slightly higher versus most major rivals after data showed a contraction in U.S. manufacturing activity in August.
The euro edged lower as currency traders awaited further details of the European Central Bank's bond-buying plans.
The euro was at $US1.2572 compared with $US1.2593 late on Monday. The dollar was at ¥78.44 compared with ¥78.26, while the euro was at ¥98.621 compared with ¥98.52.
The pound bought $US1.5879 from $US1.5886, while the dollar fetched 0.9554 Swiss franc from 0.9536 franc.