China's Christmas Day interest rate rise and a severe blizzard that blanketed the northeastern United States left U.S. share prices weak and the U.S. dollar lower in thinly traded markets on Monday.
The December 25 rate increase by the People's Bank of China was the second in just over two months, and while the timing just before year-end may have been a surprise, the move itself was not.
European stock markets fell in response to China's move, although with the UK on holiday until Wednesday, trading activity was limited.
Global share prices were mostly lower on Monday but are still hovering near highs of more than two years. Commodity prices were mixed, with oil off a 26-month peak, gold down marginally but grain prices generally stronger.
The euro rose to its best levels in a week against the greenback.
Shanghai's benchmark stock index fell 1.9 percent on the day, down 15.127 percent year-to-date as investors have been anticipating tighter lending policies by the central bank in an effort to slow rising inflation.
In the long run, this is going to be healthy for the Chinese economy, but the instinctive market reaction is that this is going to be bad for global demand, giving investors a reason to sell off equities, said Quincy Krosby, market strategist with Prudential Financial in Newark, New Jersey.
In mid-morning New York trade, the Dow Jones industrial average fell 29.40 points, or 0.25 percent, at 11,544.09. The Standard & Poor's 500 Index lost 1.07 points, or 0.09 percent, at 1,255.70. The Nasdaq Composite Index dropped 8.24 points, or 0.31 percent, at 2,657.36.
In Europe, the FTSEurofirst 300 ended 0.87 percent lower at 1,137.49.
The MSCI index of Asian stocks outside Japan rose 0.04 percent with Japan's Nikkei closing up 0.75 percent, extending its recent outperformance in Asia.
The MSCI All Country World index dipped 0.21 percent, and the Thomson Reuters global stock index lost 0.26 percent.
China's central bank said on Saturday it would raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.
On Monday the PBOC took aim at inflation once again by saying prudent monetary policy would be helpful in combating price pressures and asset bubbles.
The normally thin post-holiday trading was made more so by a severe blizzard that shut down some commuter transport networks, forcing New York trading desks to operate with skeletal staffing.
The euro rose after shaking off losses below its 200-day moving average -- $1.3087, according to Reuters data.
A move below that level is usually indicative of more losses. While fears that a euro-zone debt crisis could spread have pushed the euro below the 200-day moving average in five of the last six sessions, it has rebounded swiftly each time. It was last up 0.15 percent at $1.3135.
With no economic news, we're focusing on these technical factors, and that push above the 200-day average has been a catalyst for the euro, said Omer Esiner, strategist at Commonwealth Foreign Exchange in Washington. And with London off and the blizzard in New York, things are very subdued.
The dollar rose 0.07 against the yen at 82.92, after dropping to a three-week low in Asian trading hours.
The Australian dollar fell as low as $0.9987, though it clawed back to $1.0025, nearly flat on the day. The currency hit a six-week high of $1.0067 last week.
U.S. Treasuries prices trimmed losses after the auction of $35 billion in two-year notes at 1 p.m. (1800 GMT).
Benchmark 10-year notes reversed course to trade 1/32 of a point in higher price, pushing the yield down to 3.39 percent.
Oil prices pulled back from a 26-month high in light of China's action, which countered the influence of severe cold weather in the United States and Europe.