LONDON –

Data showing Japan slipped into recession in the third quarter raised concerns Monday about global economic health, hitting stocks and the price of oil.

Before recovering slightly, European shares fell, and Wall Street looked set to open lower, according to index futures .

The Nikkei index lost 3 percent, its biggest one-day drop since August, after the news that the world's third-largest economy unexpectedly shrank by an annualized 1.6 percent in the July-September period.

This followed a 7.3 percent contraction in the previous quarter, after the consumption tax was raised on April 1, and ran counter to economists' forecasts for a 2.1 percent rebound.

The data initially pushed the yen to a seven-year low against the dollar, but as Tokyo stocks fell the currency rebounded.

The news also shaved $1 off the price of Brent crude oil, as demand will fall if economies slide, and sent ripples across Europe, where the FTSEurofirst 300 pan-European share index was down 0.1 percent, having pared earlier losses.

Data on Friday showed eurozone economic output expanded more than expected in the third quarter but remained weak.

On Sunday, leaders from the Group of 20 developed and emerging economies agreed on a package of measures that they said will add an extra 2.1 percentage points to growth over five years.

But financial markets focused on Japan's economic downturn, which set the stage for Prime Minister Shinzo Abe to delay another increase in the consumption tax, originally set for next year, and call a snap election.

"It's a bit of shock for the market, because people believed that the Bank of Japan had everything under control. But overall, the initial negative reaction shouldn't last too long. Investors still expect central bank action worldwide to support the global economy," FXCM analyst Nicolas Cheron said.

Other Asian shares also fell. MSCI's main index of Asia-Pacific stocks outside Japan lost 0.7 percent.

Chinese equities dropped as profit taking outweighed buying by foreign investors as a landmark Hong Kong-Shanghai trading link debuted on Monday.

The Shanghai Composite ended down 0.2 percent and Hong Kong's Hang Seng lost 1 percent.

"People (in London) are doing a bit of position squaring after getting caught out by the scale of this surprise," said Daragh Maher, a strategist at HSBC in London.

The euro was down 0.2 percent at $1.2499.

As Japanese data stoked concerns about the global economy, undermining stronger than expected U.S. retail sales data on Friday, German 10-year Bund yields edged down to 0.79 percent, just above a record low of 0.716 percent.

Brent crude last traded at $78.28 a barrel, down 1.4 percent after the Japanese data was seen hitting global demand and as Saudi Arabia reiterated the oil price should be left to supply and demand.

"This is a market where traders are looking for selling opportunities," said Ole Hansen, senior commodity strategist at Saxo Bank.

Eyes remain on possible production cuts when OPEC, the oil cartel, meets next week.