BERLIN (Reuters) - Germany's main opposition Social Democrats (SPD) will nominate former finance minister Peer Steinbrueck as their candidate to challenge Chancellor Angela Merkel in next year's national election, Bild newspaper reported on Friday.

Bild, citing SPD sources, said the party's chairman Sigmar Gabriel would make the announcement on Monday. The paper said on its website that former foreign minister Frank-Walter Steinmeier had pulled out of the contest.

(Reporting by Berlin bureau)