The euro slipped on Monday and a brief European stock market rally ran out of steam as hopes of swift action from policymakers to boost the euro zone's rescue fund faded ahead of a meeting of finance ministers.

It's becoming increasingly apparent that Germany doesn't want an increase in the rescue fund and that's weighing on euro sentiment today because there were positive expectations building last week, said Manuel Oliveri, currency strategist at UBS in Zurich.

The euro was down 0.8 percent on the day against the dollar at $1.3264, having rallied some 4 percent last week to hit a one-month high of $1.3458 on Friday. Against a basket of currencies, the dollar <.DXY> was up 0.46 percent at 79.521.

European Central Bank President Jean-Claude Trichet gave a fresh thumbs-up for a bigger safety fund on Sunday, a day before euro zone finance ministers are expected to discuss an increase in its effective lending capacity.

Some analysts pointed to a February 4 European Council meeting as a more likely stage for such decisions to be made, though this week's meeting should give investors a sense of how much agreement there is among euro zone members to enlarging the facility.

German Bund futures were 17 ticks lower at 124.74.

GLOBAL STOCKS

The MSCI world equity index <.MIWD00000PUS> was down 0.3 percent at 336.47, off a 28-month high of 337.68 touched overnight as last week's rally petered out.

Chinese stocks <.SSEC> fell around 3 percent after China raised banks' required reserves for the fourth time in just over two months on Friday.

European shares <.FTEU3> fell 0.1 percent, shedding initial gains driven by a surge in British engineering firm Smiths Group after it rejected a bid for its medical services unit, and gains in oil shares. Trading was expected to be muted, however, with U.S. markets closed for a public holiday.

Oil stocks were led higher by BP following the share swap and arctic exploration deal that the London-based oil major signed with Russia's largest oil producer Rosneft late on Friday.

This is a unique opportunity for BP to gain access to a prospective new frontier area, where direct access as a non-Russian company would not have been possible, analysts at Goldman Sachs said in a research note.

Commodity prices were broadly lower, with U.S. crude oil down 0.7 percent at $90.91, while copper prices were also lower as a firmer dollar curbed upside momentum.

The U.S. is having a holiday today, and the crude and equities markets are not expected to move dramatically, said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.

Gold was at $1,359.50, down slightly from $1,360.85 in New York late on Friday but underpinned by physical buying ahead of the Chinese new year.

Emerging stocks <.MSCIEF> were down 0.5 percent.