The dollar and U.S. government debt prices rose on Monday as doubts that a European summit this week would make progress in solving the region's debilitating debt crisis fed the purchase of safe-haven assets.

Equity markets around the world fell sharply on investor skepticism the June 28-29 meeting would produce substantive measures to tackle the debt crisis, now in its third year and buffeting Spain, the euro zone's fourth-largest economy.

German Chancellor Angela Merkel agreed last Friday with leaders of France, Italy and Spain on a 130 billion euros ($156 billion) package to revive growth. But Merkel resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds.

The absence of Greece's new prime minister and finance minister due to illness complicated the outlook for the summit. A German government spokesman said no decisions would be taken on the debt-stricken country, dashing Athens' hopes the EU might ease the terms of its bailout.

Hopes are fading for major action even before the summit begins; hence the bid to Treasuries and weakness in equities, said David Ader, head of government bond strategy at CRT Capital in Stamford Connecticut.

The price of benchmark 10-year U.S. Treasury notes rose 19/32 to yield 1.61 percent.

German bonds snapped three weeks of losses, with the price of bund futures last up a full point to 142.14 and the yield on 10-year government bonds falling to 1.486 percent.

Stocks on Wall Street traded more than 1 percent lower after the open, following declines of similar proportion in Europe and elsewhere.

The Dow Jones industrial average .DJI was down 164.35 points, or 1.30 percent, at 12,476.43. The Standard & Poor's 500 Index .SPX was down 21.16 points, or 1.58 percent, at 1,313.86. The Nasdaq Composite Index .IXIC was down 51.88 points, or 1.79 percent, at 2,840.54.

In Europe, stocks .FTEU3 slid as much as 1.6 percent, retreating for a third successive session after Friday's meeting cooled expectations for a breakthrough in the debt crisis.

The MSCI all-country world equity index .MIWD00000PUS slipped 1.4 percent, while its emerging market index .MSCIEF also fell 1.4 percent.

Spanish government bonds came under pressure after Spain formally requested aid to recapitalize its banks, but did not specify how much money it would need.

Ten-year Spanish government bonds fell pushing yields higher, to 6.63 percent, while the cost of insuring five-year Spanish debt also rose.

The euro fell to its lowest in almost two weeks against the dollar and looked set to extend losses.

The euro fell as low as $1.2469, the weakest since June 12, and was last down 0.5 percent at $1.2487. It lost 1.5 percent to 99.45 yen.

Brent crude slipped, briefly falling below $90, with concerns about faltering global growth and Europe's intractable debt crisis hitting investor confidence.

Brent crude was last down 56 cents at $90.42 a barrel. U.S. crude fell $1.13 to $78.63 a barrel.

Spot gold prices rose $1.76 to $1,573.30 an ounce. The Reuters/Jefferies CRB Index .CRB was down 0.19 points at 267.78.