By Josie Cox 

Uncertainty surrounding the financial future of Greece looks set to dominate European markets in a short trading week, with the country facing a deadline to submit its latest reform proposals Monday.

Officials from Athens were in Brussels over the weekend to present proposals to the European Commission, the European Central Bank and the International Monetary Fund. Approval is crucial for Greece to regain access to bailout funds and restore normal lending from the ECB, but eurozone officials said that up until now, plans had lacked the necessary detail.

Greek government bonds weakened somewhat, though trading volume was thin.

The yield on the country's two-year bonds was around 0.43 percentage point higher in early trade at around 20.3% while the yield on 10-year bonds inched up to around 10.87%. Many European markets are shut Friday and next Monday.

A so-called inverted curve, where longer-dated bonds have a lower yield than shorter dated, generally signals that investors see a heightened risk of the country defaulting.

Many market participants said they expect Greece to strike a last-minute deal. Still, "Greece remains at risk of insolvency," Peter Chatwell, a senior rates strategist at Mizuho International said.

"Amidst the whirlwind of letters, high profile political meetings and a daily batch of fresh comments from various policy makers, it can be hard to gauge precisely where the disagreements between Greece and its creditors reside," said Michala Marcussen, global head of economics at Société Générale. "We nonetheless maintain the view that a worst case outcome would have significant market implications," she added.

Compounding jitters, Fitch Ratings on Friday slashed its credit ratings on Greece deeper into junk territory, citing the country's precarious finances as it negotiates a bailout extension.

The rating firm said it expects the government to survive the latest "liquidity squeeze" without defaulting on its debt but pointed to damage to investor, consumer, and depositor confidence that "has almost certainly derailed Greece's incipient economic recovery."

Athens main stock index was a little over 1% lower by midmorning. Banks were hit particularly hard. Alpha Bank AE shares slid to the bottom of the index, followed by National Bank of Greece SA.

The U.S. dollar started the week on a firmer footing, rising around 0.5% against both the euro and the British pound. The euro is now 10% lower against the buck so far this year as a result of the very different paths of monetary policy in the U.S. and the euro area. The euro now trades at around $1.0850.

Despite the potential for Greece to derail the market, equities more broadly rallied Monday. The Stoxx Europe 600, having ended Friday's session 0.3% higher, climbed 0.9% in early trade, while Germany's DAX, France's CAC and London's FTSE all added between 0.5% and 1%. Strategists said the persistent appetite for equities was supported by a reiteration of the accommodative stance from central banks in both Europe and China.

Last week, ECB President Mario Draghi underscored the ECB's commitment to purchase large amounts of public and private debt for at least 18 months and until it is convinced that inflation will stabilize near annual rates of 2%.

In China, policy makers on Monday signaled the country has room to ease monetary policy further, in a bid to boost sluggish growth spurring stocks across the region. "We can clearly expect more stimulus there," Rabobank rates strategists wrote in a note.

Later in the day, the People's Bank of China--in a further accommodative move--announced that it had implemented new rules to encourage banks to make mortgage loans.

Technology stocks were in focus on news late Friday that Intel Corp. is in advanced talks to buy chip partner Altera Corp. Shares in Intel surged more than 6% on the news on Friday also helping the European subindex of technology stocks up 1.6% Monday.

Swiss airport retailer Dufry AG, however, was one of the biggest risers on the pan-European index, on confirmation that it will pay 1.3 billion euros ($1.4 billion) to acquire more than half of Italy's World Duty Free Group, a deal that will boost its position in the global travel industry.

In commodity markets, Brent crude was 0.9% lower on the day at $55.93 per barrel. Gold lost 1% to just over $1,187 per troy ounce. In the U.S., the S&P 500 was indicated opening 0.6% higher on the day. Futures, however, don't necessarily reflect moves after the opening bell.

Write to Josie Cox at josie.cox@wsj.com

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