NEW YORK (REUTERS) - Oil prices fell and global equity markets were mixed on Monday after news that Japan unexpectedly slipped into recession in the third quarter renewed concerns about world growth.
But two blockbuster acquisitions and anticipation of more European stimulus capped declines and helped lift the S&P 500 to a record closing high on Wall Street.
The Japanese yen steadied against the US dollar, pulling back from a fresh seven-year low, as the economic data 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 annualised 1.6 per cent after a 7.3 per cent slide in the second quarter, when a sales tax hike hit consumer spending.
Analysts polled by Reuters had expected 2.1 per cent growth in the third quarter, but consumption and exports remained weak, saddling companies with big inventories.
Tokyo's Nikkei index lost 3 per cent, its biggest one-day drop since August, and Wall Street closed mixed after a choppy session.
Brent oil initially fell more than US$1 towards US$78 a barrel as Japan is the world's No. 4 crude importer.
"Concern about deceleration of economic growth particularly in Asia" weighed on markets, said Mr Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
News that Allergan agreed to be bought by Actavis, while Halliburton said it would buy Baker Hughes, in deals worth US$100 billion (S$130 million), helped offset declines. Allergan and Baker Hughes were two of the top three point gainers on the S&P 500, up 5.3 per cent and 8.9 per cent, respectfully.
Comments by European Central Bank president Mario Draghi that the bank is ready to do more if its stimulus is not enough to accelerate the euro zone recovery also offset declines.
MSCI's All-Country World Equity Index, which tracks shares in 45 nations, slipped 0.19 per cent to 419.52.
The Dow Jones Industrial Average closed up 13.01 points, or 0.07 per cent, to 17,647.75, while the S&P 500 rose 1.5 points, or 0.07 per cent, to 2,041.32. The Nasdaq Composite lost 17.54 points, or 0.37 per cent, to 4,671.00.
European shares rebounded, turning solidly positive after Mr Draghi reasserted he was ready to do more to fight deflation.
The FTSEurofirst 300 Index of top European shares rose 0.51 per cent to close at 1,352.01.
Yields on most lower-rated euro zone bonds fell because Mr Draghi said unconventional monetary policy measures could include buying sovereign debt.
Italian 10-year bond yields fell 5 basis points to 2.29 per cent, while equivalent Spanish yields fell 3 basis points to 2.21 per cent Brent crude settled down 10 US cents at US$78.31 a barrel, after dipping as low as US$77.94 earlier in the session. US crude for December delivery settled down 18 cents at US$75.64 a barrel.
The dollar was last at 116.45 yen, 0.15 per cent higher, after earlier rising as high as 117.04 yen.
The dollar also gained against the euro after an ECB 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 US$1.2451, down 0.56 per cent.
US Treasury debt prices fell in choppy trading as investors took profits on gains fuelled by the weak Japanese data.
Benchmark 10-year U.S. Treasury notes were last down 5/32 in price to yield 2.3399 per cent.