Signs last week that EU leaders were seeking to beef up the euro zone bailout fund prompted a revival in stock markets and riskier assets, but slow progress on a firm plan of action has seen investors return to risk-averse mood, lifting Bunds.

Bund futures were up 40 ticks at 136.91, extending Friday's strong rally while European stocks were set for sharp losses.

"Stocks have suffered all round. I'm not sure we were expecting a lot of progress over the weekend but there's nothing other than Greece pledging some new measures," a trader said.

European Central Bank member Christian Noyer said it was unrealistic to expect an increase in the size of the fund, but that he was open to programmes that would allow leveraging to expand capacity.

Later on Monday, uro zone finance ministers will discuss how to leverage the fund and also seek a way to resolve Greece's growing problems after Athens said on Sunday it would miss budget deficit targets agreed in July.

Growth on the other other side of the Atlantic -- another major concern for markets -- comes into focus with US manufacturing data beginning a week of heavyweight economic reports.

Faltering growth in the world's largest economy has been a significant factor behind global stocks posting their worst quarter in nearly three years and the continued strong demand for low-risk government bonds.