Swooning bank shares contributed to a drop in European stock markets on Monday as investors fretted over whether Greece will need a second financial bailout in just over a year.
Though reports Friday that the country was even considering leaving the euro have been flatly denied, investors think Greece will need more assistance from the eurozone and the International Monetary Fund as it remains unable to tap bond markets.
"What Friday's reports have done is put the thorny subject of sovereign debt restructurings back at the top of the political agenda and the economic agenda," said Michael Hewson, market analyst at CMC Markets.
EU officials this weekend acknowledged that Greece may need more help. Many investors, however, think that a restructuring of Greece's debt is inevitable. That would mean holders of Greek bonds will have to accept that the value of their assets are not what they thought they were when they first bought them.
Greek bonds are owned by a wide variety of institutions and they could all be impacted by a potential restructuring. As a result, bank shares across Europe have suffered.
In Europe, the FTSE 100 index of leading British shares was down 0.4 percent at 5,952 while Germany's DAX fell 0.7 percent to 7,443. The CAC-40 in France was 0.8 percent lower at 4,027. In Greece, the main index was down 1.1 percent.
Bank stocks were lower all over Europe. Deutsche Bank AG was down 1.8 percent while BNP Paribas SA fell 2 percent. Even banks in the U.K., which is not a member of the euro, suffered too, with Barclays PLC down 1.3 percent.
The euro was faring a little better on Monday after dropping heavily on Friday, when German magazine Der Spiegel said Greece was considering leaving the euro. The online report came out after European stock markets had closed.
By late-morning the euro was trading 0.2 percent higher at $1.44. On Friday, the single currency slid to a low of $1.4306 from around $1.45 before the euro exit speculation.
Although European markets are struggling, Wall Street is poised to open strongly, as investor sentiment remains buoyed by last Friday's forecast-busting U.S. jobs data for April. Dow futures were up 0.4 percent at 12,620 while the broader Standard & Poor's 500 futures rose by a similar rate to 1,340.
Investors were cheered Friday by the news from the U.S. Labor Department that private employers hired 268,000 people in April, the most since February 2006. Taking into account job cuts of government workers, the economy added a total of 244,000 jobs overall last month, well above the 185,000 jobs that analysts had predicted and easing worries that the economic recovery was faltering.
The U.S. jobs figures also continued to prop up commodity and energy markets after last week's big declines. Improved hopes over the U.S. economic recovery have helped allay fears of much lower demand for such products.
In the oil markets, a barrel of crude oil as traded in New York was back above $100 a barrel at $100.16, $2.98 up on the day.
Earlier in Asia, Hong Kong's Hang Seng rose 0.8 percent to 23,336 while Australia's S&P/ASX 200 added 0.3 percent to 4,756.80.
But Japan's Nikkei 225 stock average ran into headwinds as the country struggles to rebuild following the March earthquake and tsunami. Down 0.7 percent at 9,794.38, the index has lost 4 percent since the March 11 disasters killed more than 25,000 people, destroyed towns, upended a nuclear power plant and washed away entire industries.
Mainland Chinese shares edged higher as investors snapped up bargains after last week's big losses.
The benchmark Shanghai Composite Index gained 0.3 percent to 2,872.46 and the Shenzhen Composite Index gained 0.7 percent to 1,203.07. Shares in nuclear energy and railways led the gains.
Pamela Sampson in Bangkok contributed to this report.