European stocks were down around 0.7 percent in morning trade, led lower by banks, on revived worries over debt-stricken Greece after a report said Germany was pushing for Athens to give up control over its budget policy to European institutions as part of discussions over the second bailout package. .EU

Italian government bonds came under pressure on Monday ahead of an auction of five and 10-year paper, while appetite for safe-haven assets underpinned German debt ahead of a European Union summit. Recently improved sentiment towards peripheral bonds is expected to support Italy's sale of up to 8 billion euros, despite a rating cut on Friday by Fitch and the fact that Greece has yet to finalize a debt swap deal with its private creditors.

EU leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.

The summit, the 17th in two years as the EU battles to resolve its sovereign debt problems, is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity.

Swiss engineering group ABB (ABBN.VX) said on Monday it had agreed to buy U.S. electrical components maker Thomas & Betts for $3.9 billion in cash to broaden its inroads into the world's largest market for low-voltage products.

Standard & Poor's took negative ratings actions on three midsize brokerage firms on Friday, saying the European financial crisis could hurt their profitability for a prolonged period of time.

Bank of America Corp (BAC.N) is shaking up the leadership of its investment bank as it looks to find its footing in a difficult market environment.

Citigroup's (C.N) chairman, Richard Parsons, is considering giving up the position to focus on other interests, the Wall Street Journal reported on Sunday, citing people familiar with the situation.

U.S. stocks trimmed losses to end little changed on Friday, as investors saw dips in the market as an opportunity to buy into what has been a strong first month of 2012.

The Dow Jones industrial average .DJI was down 74.17 points, or 0.58 percent, at 12,660.46. The Standard & Poor's 500 Index .SPX was down 2.11 points, or 0.16 percent, at 1,316.32. The Nasdaq Composite Index .IXIC was up 11.27 points, or 0.40 percent, at 2,816.55.

(Reporting by Blaise Robinson, Editing by Mark Potter)

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