European stocks declined on Monday, with bank shares losing steam following stress-test results for the industry, and as an update on eurozone manufacturing activity showed further slowing.

The stress tests were aimed at showing how much capital, or cushion against losses, banks would have left on their balance sheets in a severe downturn. Italian, Irish and Spanish banks put in the worst performances of the 51 firms tested.

Banks that suffered hits to their capital buffers in the test scenarios included Italy's UniCredit SpA, London-based Barclays PLC and German lender Deutsche Bank AG. UniCredit UCG, -9.40% and Barclays BARC, -2.04% BCS, -3.03% opened higher but since flipped lower, losing 9.4% and 2%, respectively. Deutsche Bank shares DBK, -2.56% DB, -2.75% also gave up gains, closing 1.8% lower.

U.S. stocks lost momentum to finish mostly lower Monday as crude-oil futures returned to bear-market territory and weaker-than-expected manufacturing data raised doubts about the strength of the economy.

The S&P 500 SPX, -0.13% shed 2.76 points, or 0.1%, to close at 2,170.84 after the large-cap gauge hit a record intraday high of 2,178.29.

The Dow Jones Industrial Average DJIA, -0.15% fell 27.73 points, or 0.2%, to close at 18,404.51.

However, the Nasdaq Composite Index COMP, +0.43% climbed 22.06 points, or 0.4%, to end at 5,184.20, boosted by appetite for tech giants, including a 1.8% jump in shares of Apple Inc. AAPL, +1.77%

Meanwhile, losses for crude CLU6, +0.17% snowballed, with the U.S. oil benchmark dropping almost 4% and at one point trading below the key $40 level amid worries about a supply glut and subdued demand. Crude oil is now off 21.8% from its peak of $51.23 a barrel hit in early June, signifying a bear market, or drop of at least 20% from a recent peak.

Asian shares slipped on Tuesday, taking their cues from a modestly lower day on Wall Street, while crude oil prices stabilized after their overnight tumble and the U.S. dollar edged higher.

Reserve Bank of Australia has cut its cash rate target to 1.5% from 1.75%