The euro rose on Monday after German and French leaders promised to announce fresh steps to tackle the euro zone debt crisis by the end of the month, but the lack of details kept government bonds supported and world stocks gave up brief early gains.
German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks in Berlin on Sunday that their goal was to come up with a sustainable answer for Greece's debt problems and agree how to recapitalize European banks.
But they declined to give any details of their plan.
Investors are also cautious ahead of a key vote by the Slovakian parliament on Tuesday to ratify changes to the rescue fund to increase its lending capacity. One dissenting voice among the 17 countries that use the euro could wreck that plan.
Only positive for the market short-term. It is good the governments are finally realizing they have to step in, said Joe Rundle, head of trading at ETX Capital.
But I do not think it is as jolly as it looks and there is still going to be this uncertainty hanging over the market. Although they are trying to put on a common front, it is very difficult to get deals done.
MSCI world equity index <.MIWD00000PUS> was flat after a brief early rise, having posted a second consecutive weekly gain last week. The benchmark index is more than 7 percent above its 15-month low set last week.
European stocks <.FTEU3> gained 0.2 percent, but emerging stocks <.MSCIEF> fell 0.2 percent on the day.
China shares closed at their lowest since March 2009 <.SSEC>, dragged by property issues after local media reported a drop in property sales volumes during the Golden Week holiday last week as volume in Shanghai slumped to a 33-month low.
U.S. crude oil was steady at $83.57 a barrel.
Bund futures rose 27 ticks, with safe-haven flows also underpinned by downgrades of Italy and Spain's credit ratings on Friday. Moody's warned it could cut Belgium's rating [ID:nN1E7961Q2].
The dollar <.DXY> lost half a percent against a basket of major currencies.
The euro rose 0.6 percent to $1.3478, pulling further away from last week's nine-month low around $1.3145.
Concrete steps to recapitalize euro zone banks could offer some relief to the euro, which has been dogged by mounting worries about the impact of the euro zone's debt crisis on the European banking sector.
France, Belgium and Luxembourg agreed early on Monday a rescue plan for Dexia bank, while other French banks have come under intense pressure because of their exposure to Greece and other weak European countries.
(Editing by Hugh Lawson)