European stocks were up 0.5 percent in morning trade on Monday following a dismal week, but gains were capped by lingering worries over the future of Greece into the euro zone.

On Saturday, G8 leaders stressed that their "imperative is to promote growth and jobs" and gave verbal backing for Greece to stay in the euro, but despite calls from the United States for immediate moves to boost growth, no sign emerged that Germany would soften its stance on austerity as the cure for Europe's debt problems.

Yahoo (YHOO.O) will be in the spotlight after news that Chinese Internet entrepreneur Jack Ma is buying back up to half of a 40 percent stake in his Alibaba Group from Yahoo for $7.1 billion, in a deal that moves the Chinese e-commerce leader closer to a public listing.

Newly issued shares in Facebook Inc (FB.O) may have a hard time in the coming week if lead underwriter Morgan Stanley stops supporting the stock and managers lower down in the IPO book who were hoping for an early surge decide to get out before going underwater.

Wanda Group, one of China's largest theatre owners, has agreed to buy AMC Entertainment in a deal valued at $2.6 billion, creating the world's biggest cinema operator, the companies said.

Chinese traders have defaulted on some thermal coal contracts following a drop in prices over the past month, traders said on Monday, providing more evidence that a slowdown in the world's second-largest economy is hitting the appetite for commodities.

The coal defaults also come after sources at steel mills and traders said last week that some iron ore shipments had been postponed. China is the world's biggest consumer of iron ore, coal and other base metals, but recent data has shown the economy cooling more quickly than expected.

The chief executives of Apple Inc (AAPL.O) and Samsung Electronics Co Ltd (005930.KS) come face to face on Monday in court-directed mediation in the United States over a dispute in which the iPhone maker claims the Korean firm has "slavishly" copied some of its products.

Stocks fell on Friday after a sloppy debut by Facebook Inc (FB.O) spoiled hopes that a spectacular open for the most-anticipated stock sale in years would brighten the mood in what has been a gloomy month for equity markets.

The Dow Jones industrial average .DJI dropped 73.11 points, or 0.59 percent, to 12,369.38. The Standard & Poor's 500 Index .SPX lost 9.64 points, or 0.74 percent, to 1,295.22. The Nasdaq Composite Index .IXIC fell 34.90 points, or 1.24 percent, to 2,778.79.

(Reporting by Blaise Robinson; Editing by Toby Chopra)

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