After heavy declines in Asia, Europe headed south with London's benchmark FTSE 100 index shedding 0.4 percent.
Wall Street also retreated from records set last week, to close mostly lower, but off the day's low point in quiet holiday trading, while the Dow got a boost from positive news from Boeing.
"Stock markets are largely lower as traders are worried about the US-China trading relationship as well as the violence in Hong Kong," said David Madden, analyst at traders CMC Markets UK.
The pound was up around three-quarters of a percentage point versus the dollar, adding further downward pressure to the FTSE 100 that features several multinationals earning in the US unit.
Sterling also climbed against the euro, as official data showed Britain had dodged a recession in the third quarter with growth of 0.3 percent and the ruling Conservatives of Prime Minister Boris Johnson received a major electoral boost.
"The pound was given a boost by Nigel Farage's announcement that the Brexit party won't stand in the 317 seats currently occupied by the Conservatives," said Oanda analyst Craig Erlam.
Farage, a leading force behind the 2016 referendum vote to leave the European Union, had faced criticism that he risked splitting the eurosceptic vote on December 12 if his party ran candidates in constituencies currently held by the Conservatives.
In the eurozone, Madrid's IBEX 35 index spent most of the day lower after Socialist premier Pedro Sanchez emerged as winner but weakened from Sunday's repeat election.
The vote also propelled the far-right Vox into third place in a result set to deepen years of political turmoil in Spain, a leading member of the eurozone.
The IBEX 35 moved into positive territory in the final minutes of trading, ending the day with a gain of less than 0.1 percent.
Asian markets turned sharply lower on Monday, while Hong Kong was hit also by fresh protests in which at least one person was shot.
Signs of progress from Beijing and Washington towards a "phase one" trade deal has fueled an equity rally for the past few weeks, but President Donald Trump on Friday contradicted the Chinese assertion that the sides already had agreed to roll back tariffs.
Art Hogan of National Holdings said markets are "trying to figure out whether we know where we stand on trade, because of mixed messages coming out of the White House."
The broad-based S&P 500 lost 0.2 percent, but the Dow ended a fraction higher after Boeing's announcement that it expects approval to return the 737 MAX to service in January nearly a year after it was grounded worldwide following two deadly crashes.
New York - Dow: UP less than 0.1 percent at 27,691.24 (close)
New York - S&P 500: DOWN 0.2 percent at 3,087.01 (close)
New York - Nasdaq: DOWN 0.1 percent at 8,464.28 (close)
London - FTSE 100: DOWN 0.4 percent at 7,328.54 points (close)
Frankfurt - DAX 30: DOWN 0.2 percent at 13,198.37 (close)
Paris - CAC 40: UP less than 0.1 percent at 5,893.82 (close)
Madrid - IBEX 35: UP less than 0.1 percent at 9,399.90
EURO STOXX 50: FLAT at 3,699.35
Tokyo - Nikkei 225: DOWN 0.3 percent at 23,331.84 (close)
Hong Kong - Hang Seng: DOWN 2.6 percent at 26,926.55 (close)
Shanghai - Composite: DOWN 1.8 percent at 2,909.97 (close)
Pound/dollar: UP at $1.2855 from $1.2774 at 2100 GMT
Euro/pound: DOWN at 85.81 pence from 86.25
Euro/dollar: UP at $1.1032 from $1.1018
Dollar/yen: DOWN at 109.05 yen from 109.26 yen
Brent North Sea crude: DOWN 0.4 percent at $62.26 per barrel
West Texas Intermediate: DOWN 0.6 percent at $56.90 per barrel
New York, United States | AFP
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