Major indexes surged last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff." The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts.
Meanwhile, the U.S. economy keeps recovering, though only at a modest rate. On Friday, official figures showed employers added 155,000 jobs in December, roughly as expected. The good sign was that hiring held up during the tense fiscal negotiations in Washington. But the increase was not large enough to bring the unemployment rate down from 7.8 percent.
Having enjoyed a good couple of days, investors appeared ready to cash in.
"It just seems like markets are entering a consolidation phase after recent gains," Stan Shamu, market strategist at IG Markets in Melbourne, said in a market commentary.
Britain's FTSE 100 fell 0.3 percent to 6,071.53 while Germany's DAX was down nearly 0.5 percent to 7,738.63. France's CAC-40 lost 0.6 percent to 3,707.68.
Wall Street appeared headed for losses ahead of the opening bell. Dow Jones futures fell 0.1 percent to 13,330 while S&P 500 futures lost 0.1 percent to 1,456.10.
The one bright spot was the banking sector, where stocks were up after global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks don't fall back into the sort of trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which certain amounts of cash had to be readily available.
The move caused a jump in bank shares - Deutsche Bank was up 3.6 percent but the biggest gains were among ailing Spanish banks, which some had feared would struggle to meet the new cash requirements. Bankinter was up 7 percent and Banco Popular was 4 percent higher.
The subdued mood in the broader markets was also seen earlier in Asia. The Nikkei in Tokyo fell 0.8 percent to close at 10,599.01.
The Hong Kong Hang Seng was nearly unchanged at 23,329.75. South Korea's Kospi lost less than 0.1 percent to 2,011.25. Benchmarks in Singapore and Taiwan fell while mainland Chinese shares rose. Weakness in Australian's resource sector sent the S&P/ASX 200 in Sydney 0.1 percent lower to 4,717.30.
South Korean and Taiwanese companies that were fined by China last week for fixing prices of LCD display screens saw their stocks tumble Monday. Taiwan's AU Optronics Corp. fell 5.1 percent. HannStar Display Corp. fell 4.7 percent. South Korea's LG Display fell 2.6 percent.
In commodity markets, the benchmark crude oil contract for February delivery was 45 cents lower at $92.64 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 17 cents to close at $93.09 in New York on Friday.
In currencies, the euro fell to $1.3041 from $1.3072 late Friday in New York. The dollar dropped against the Japanese yen, to 87.88 yen from 88.13 yen.