LONDON -- Stock markets in Europe traded in fairly narrow ranges Monday as Germany's leader warned that Greece may not get its next batch of bailout cash. Chinese shares surged after authorities pledged to increase bank lending to entrepreneurs. Europe's stumbling efforts to get a handle on its debt crisis remains the focus of interest in the markets. French President Nicolas Sarkozy and German Chancellor Angela Merkel met Monday a month after all 27 EU countries but Britain agreed to thrash out a new treaty by March to enforce tougher budget controls.

"Markets will be hoping that the one-eyed insistence on budget discipline by Angela Merkel also gives way to looking at practical measures to stimulate growth in Europe," said Michael Hewson, markets analyst at CMC Markets.

On the growth front, the two leaders told reporters that European nations should compare the continent's best labor practices and implement them, as well as figure out how to use European funds to create jobs.

There are mounting signs the 17-nation eurozone is heading for a recession, which has weighed on markets over the past days. On Monday, the latest data showed German industrial production fell in November, suggesting even Europe's richer countries are feeling the pinch.

Merkel also urged Greece and its private creditors to quickly agree upon the restructuring of the country's national debt.

Otherwise, she warned Greece would not get its next desperately needed batch of bailout cash. In October, the eurozone agreed upon a second bailout for Greece that involves private creditors forgiving 50% of the value of their Greek debt holdings.

Fears of a default have already pushed Greece, Ireland and Portugal to need bailouts are now threatening much-bigger Spain and Italy. The yield on Italy's benchmark ten-year bonds on Monday continued to hover around the 7% mark, widely considered to be unsustainable in the long run.

After a perky start to the year, market sentiment has deteriorated again due to concerns about Europe's ability to solve its debt problems.

On Monday, Germany's DAX was up 0.1% at 6,064 while the CAC-40 in France rose 0.6% to 3,156. The FTSE 100 index of leading British shares was down 0.1% at 5,645.

The euro, which last week took a battering on fears over both the debt crisis and the likelihood that the eurozone is heading toward recession, recovered some ground, trading 0.6% higher at $1.2760. Earlier, during Asian trading hours, it had fallen to a 16-month low of $1.2676.

Wall Street was poised for a subdued opening after a lackluster response to strong U.S. jobs numbers last Friday. Dow futures were up 0.2% at 12,333 while the broader Standard & Poor's 500 futures rose 0.1% to 1,276.

Earlier in Asia, Chinese shares in Hong Kong and the mainland jumped sharply following a weekend government planning conference during which Premier Wen Jiabao promised to channel lending to entrepreneurs who have been battered by weak global demand.

China tightened lending and investment curbs last year to cool its overheated economy but has reversed course in recent months following a slump in global demand that has hurt exporters and led to job losses.

Hong Kong's Hang Seng index jumped 1.5% at 18,865.72. The benchmark Shanghai Composite Index gained 2.9% to 2,225.89, while the Shenzhen Composite Index gained 3.7%. Elsewhere, South Korea's Kospi fell 0.9% to 1,826.49. In Japan, financial markets were closed for a public holiday.

Trading in the oil markets was fairly subdued, with benchmark crude for February delivery down 9 cents at $101.47 a barrel in electronic trading on the New York Mercantile Exchange.

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