By Herbert Lash and Wanfeng Zhou
NEW YORK (Reuters) - U.S. and European stocks slipped on Wednesday as investors paused after a robust recent rally, while the euro fell ahead of a European Central Bank meeting that could reveal concerns about the currency's strength.
Investors awaited fresh incentives to push markets higher, after recent rallies that took the S&P 500 to five-year highs and euro zone equities to 1-1/2-year peaks.
Disagreement between Germany and France over the exchange rate for the euro stoked concern about stability in the euro zone, adding to uncertainty over the outcome of upcoming Italian elections and a corruption scandal in Spain.
The ECB is widely forecast to keep rates at a record low 0.75 percent when it meets on Thursday, but policymakers may examine whether the strength of the euro is undermining a recovery in troubled economies.
"Overall, we believe that the next near-term market dip should provide an opportunity to buy stocks ahead of rallies higher in the coming months, but we are skeptical about the long-term sustainability of these gains due to the maturing age of the bull market," said Ari Wald, equity research analyst at C&Co\PrinceRidge in New York.
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The Dow Jones industrial average fell 36.97 points, or 0.26 percent, to 13,942.33. The Standard & Poor's 500 Index lost 5.05 points, or 0.33 percent, to 1,506.24. The Nasdaq Composite Index dipped 13.94 points, or 0.44 percent, to 3,157.64.
The S&P 500 has gained 6 percent so far this year, lifting the benchmark equity index to highs last seen in December 2007. The Dow briefly climbed above 14,000 for the first time in more than five years during the rally.
The EuroSTOXX 50 gauge of euro zone blue chips fell 1.3 percent to 2,617.35 points, its weakest finish since early December and further retreating from 1-1/2 year peaks of 2,754.80 points set last week.
The pan-European FTSEurofirst slipped 0.2 percent to 1,152.12 points, its losses tempered by a solid performance from UK blue chips.
MSCI's all-country world equity index was little changed at 354.83.
After France complained about the euro's level, German Chancellor Angela Merkel's spokesman said the currency was not overvalued and that competitiveness could not be achieved via exchange rates.
The euro was 0.5 percent lower against the dollar at $1.3515 and lost 0.8 percent to 126.11 yen.
"The focus is speculation over tomorrow's ECB statement and President Draghi's press conference," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto. "We expect President Draghi to sound notably cautious and EUR to weaken on the back of it."
Japan's yen, at the center of concerns that some countries are trying to devalue their currencies to boost growth, hit a near-three-year low earlier in the day on the view a new Bank of Japan governor will ease policy aggressively once in office.
The yen fell 0.3 percent to 93.31.
The yen's decline spurred Japan's Nikkei index to climb to its highest in more than four years.
Brent crude oil futures recovered from early losses. Brent futures rose 13 cents to $116.65 a barrel. U.S. light sweet crude oil was down 8 cents at $96.57 a barrel.
U.S. government debt prices rose on weaker stocks, while nagging worries about possible political shake-ups in Italy and Spain also rekindled demand for safe-haven bonds.
Political uncertainty in Europe and a retreat in equities boosted safe-haven U.S. government debt. The benchmark 10-year U.S. Treasury note was up 11/32 in price to yield 1.9639 percent.
Bond prices climbed also as traders sought to profit from the Federal Reserve's latest purchase of Treasuries, which was part its $44 billion monthly program aimed at lowering borrowing costs and unemployment.
"There are still a lot of possible disruptive currents coming from Europe," said Lou Brien, market strategist at DRW Trading in Chicago. "The problems there have not gone away, but the market had just ignored them until this week."
(Additional reporting by Nick Olivari, Richard Leong and Angela Moon; Editing by Bernadette Baum)