World stocks added to the previous week's losses on Monday, hugging one-month lows as investors pulled back from a more than seven month rally and prepared for the eventual withdrawal of stimulative monetary policy.

The dollar slipped against major currencies after enjoying its biggest weekly gain since early June.

Investors were bracing for a week of meetings at major central banks, including the U.S. Federal Reserve and European Central Bank, the release of minutes from the past meetings of others and a G20 finance ministers' meeting.

At issue in all cases is the future of the liquidity that has been behind much of this year's financial market recovery, in the form of low interest rates and quantitative easing designed to pump money into the financial system.

It's central bank week, said one bond trader.

News that CIT Group INC, a U.S. lender to hundreds of thousands of small and medium-sized businesses, finally filed for bankruptcy on Sunday, also underscored the continuing fragility of parts of the financial sector.

World stocks as measured by MSCI were down 0.3 percent, adding to last week's more than 4 percent loss, the largest since early March just before the rally began. Emerging market stocks lost 0.6 percent.

European shares hit a four-week low on Monday, extending the previous session's sharp declines, but later recovered a bit. The FTSEurofirst 300 index of top European shares was flat. It fell 2.1 percent on Friday.

Everybody is anxious and knows that the market went a little bit too fast, said Koen De Leus, economist at KBC Securities.

Earlier, Japan's Nikkei stock average fell 2.3 percent to hit a three-week closing low.


The dollar was flat against a basket of major currencies, but only after gaining more than 1 percent last week, its best performance since the week ending June 7.

The currency has lost 6 percent this year as investors have deserted it for higher-yielding competitors and returned to non-U.S. stock markets after last year's flight.

The euro was up 0.4 percent at $1.4771 but the dollar gained slightly against the yen and rose 0.4 percent against the pound to $1.6374.

Euro zone bonds were mixed, with demand stronger for shorter-dated debt.

(Additional reporting by Atul Prakash and Kirsten Donovan; Editing by Ruth Pitchford)