Fears that Greece might not accept the painful terms of a proposed new bailout deal brought a rally in global shares and the euro to a halt on Monday, underming the positive effect of better global economic data.

U.S. stock index futures indicated that worries over Greece would prompt some retracement on Wall Street after a surprisingly strong U.S. jobs report pushed shares higher at the end of last week.

Over the last 2-3 weeks, given risk assets were well bid, there was a tendency to see the glass half full and assume the negotiations would go smoothly, said Chris Turner, head of FX strategy at ING.

There is a slight risk that this could all break down before March. I don't think a disorderly default is priced into the market at all.

Greek political leaders had on Monday still not agreed to accept deeply unpopular public wage cuts and other painful measures that international lenders are demanding as a condition of a second Greek bailout, which Athens needs to secure to avoid a disorderly default.

The slow progress to sort out the Greek mess has angered the country's European partners and undermined investor confidence across all markets.

The FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,073.76 points, while the euro zone's blue chip Euro STOXX 50 index was down 0.5 percent at 2,501.52 points, halting a seven-week rally during which the index has surged about 15 percent.

The euro was down 0.5 percent at $1.3073, having touched a low of $1.3030, after hitting a six-week high last week of $1.3235.

Analysts, however, said the underlining sentiment in markets remained positive given improving economic data and riskier assets such as equities and commodities were poised to resume the brisk new year rally which has seen many assets return to levels not seen since the middle of last year.

The bullish sentiment has been boosted by strong readings from leading indicators of economic activity for January from the U.S., China and Germany, and an easier monetary stance from the world's major central banks, which looks set to continue at key meetings this week.

Orders for German industrial goods, released on Monday, extended the run of good data showing a better-than-expected 1.7 percent rise for December, propelled by demand from outside the euro zone which more than made up for a drop in orders from within the currency bloc.

GREEK IMPACT WIDESPREAD

Safe-haven German government bond yields and March Bund futures ticked higher amid the lack of progress on a Greek debt deal though the market still expects an agreement to be forged. March Bund futures were 32 ticks higher at 138.64, while 10-year German yields were 3.5 basis points lower at 1.90 percent.

The U.S. dollar, which had risen sharply in the wake of the jobs report, extended its gains against the yen to 76.64, having rallied to 76.809 yen at one point, its highest in over a week.

Against a basket of major currencies the greenback was up 0.65 percent at 79.42.

Gold was buffeted between investors fearing the impact of a stronger dollar and those seeking a safe haven amid the worries over Greece. Spot gold was down 0.5 percent at $1,717.90 an ounce, while U.S. gold futures for February delivery were down $19.20 an ounce at $1,721.20.

Concern over the state of play with Greece pushed Brent crude oil prices down near $114 a barrel as a messy default could have an impact on demand across the euro zone, although renewed tensions with Iran kept a floor under prices.