Wall Street was set to skid more than 1 percent at the open on Monday as renewed jitters about Europe's debt crisis and the global economy overshadowed the start of earnings season.

Global equity markets fell, the euro slid more than 1 percent and the cost of insuring Italian debt jumped to a record amid fears Europe's debt crises could spread and news reports some European Union leaders were considering allowing a selective default by Greece.

Europe is the issue that just won't go away because it's demanding a recalibration that is going to really reset the table, said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

Banks and other economically sensitive stocks came under pressure in early New York trading. Bank of America Corp fell 1.1 percent to $10.58, while Freeport McMoran Copper & Gold Inc fell 1.3 percent to $54.39.

U.S. lawmakers failed to reach an agreement over a budget deal at a meeting on Sunday. The continued impasse comes after a much weaker-than-expected U.S. employment reading for June shocked investors and hit equity markets on Friday.

Also worrying investors, Chinese annual inflation rose to a three-year high in June, data on Saturday showed, increasing chances for yet more monetary policy tightening there.

S&P 500 futures slipped 18.1 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dipped 130 points, and Nasdaq 100 futures fell 29 points.

In the short term, in terms of worries -- not actual events but worries --it's a little bit of a perfect storm for investors, said Oliver Pursche, president at Gary Goldberg Financial Services in Suffern, New York.

At the start of the U.S. earnings season, profits of S&P 500 companies are expected to increase an average of 7.3 percent in the second quarter from a year ago, down from first-quarter growth of 18.9 percent, Thomson Reuters data showed.

European Council President Herman Van Rompuy called an emergency meeting of top officials to discuss the debt crisis, amid fears it could engulf Italy, the region's third-biggest economy.

The cost of insuring Italian debt against default jumped to a record high, with five-year credit default swaps rising 30 basis points to 279 basis points, according to data monitor Markit. The cost of insuring Greek, Portuguese and Irish debt against default also rose.

Shares in Italy's biggest bank, Unicredit Spa , fell 2 percent on Monday after losing 7.9 percent on Friday, partly because of worries about the results of stress tests of European banks to be released on July 15.

The FTSEurofirst 300 <.FTEU3> index of leading European shares fell 1.4 percent on Monday, extending a 0.8 percent fall in the previous session. Japan's Nikkei <.N225> fell 0.7 percent overnight after three weeks of gains.

Alcoa Inc is set to kick off the second-quarter earnings season. Shares in Alcoa fell 0.9 percent to $16.23.

(Reporting by Edward Krudy; Editing by Kenneth Barry)