LONDON (AP) — Markets were in a cautious mood on Monday as talks dragged on between Greek political leaders over a fresh austerity package that is required if the debt-ridden country is to get a crucial bailout package.

Even though another round of deadlines have passed, the prevailing mood in the markets is that Greece will get a debt-reduction deal with its private creditors as well as a second bailout from its partners in the eurozone and the International Monetary Fund.

However, as one deadline after another is missed, some traders are preparing for the worst — a disorderly debt default that could send shockwaves round the global economy.

The leaders of the parties backing Greece’s coalition government, which is headed by Prime Minister Lucas Papademos, were to hold a second day of emergency talks over austerity measures that rescue creditors are demanding in return for more money. The talks, however, were postponed until Tuesday despite pressure from the European Union for a speedy agreement so that the country can avoid a default on its debt.

Greek politicians are balking at the level of austerity demanded by the country’s bailout lenders. The three party leaders have publicly opposed steep cuts in public sector pay demanded by the eurozone and International Monetary Fund, but their backing is needed for the government to reach a deal for a euro130 billion ($170 billion) bailout.

“While we still believe that a voluntary Greek debt restructuring deal and further EU aid will be forthcoming, the risks of a more disruptive scenario have probably increased,” said Vassili Serebriakov, an analyst at Wells Fargo Bank.

In Europe, the FTSE 100 index of leading British shares closed down 0.2 percent at 5,892.20 while Germany’s DAX was flat at 6,764.83. The CAC-40 in France ended 0.6 percent lower at 3,405.27.

On Wall Street, the Dow Jones industrial average was down 0.3 percent at 12,822.38 while the broader Standard & Poor’s 500 index was 0.2 percent lower at 1,341.82.

So far this year, the mood in markets has been particularly upbeat, especially compared with the febrile trading that marked 2011. Stocks have rallied — many indexes are at their highest levels in months — while the cost of borrowing for key euro countries, such as Italy and Spain, has eased to levels that are considered sustainable in the long-run.

One of the reasons behind the change in tone has been optimism that Greek Prime Minister Lucas Papademos, who is due to meet with negotiators from the eurozone and the International Monetary Fund later Monday, will secure the second bailout.

The euro130 billion ($171 billion) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a euro14.5 billion ($19.1 billion) bond repayment due March 20 without the rescue funds.

The bailout’s implementation also depends on Greece’s progress in separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.

Another key prop to the improvement in market sentiment this year has been a run of solid economic data out of the U.S., which has prompted some analysts to revise up their expectations for growth in the world’s largest economy. The improving trend was evident last Friday, when government figures showed the U.S. economy generated a bigger than expected 243,000 jobs in January, pushing the unemployment rate down to 8.3 percent.

The euro was under pressure as investors awaited developments in Athens — the currency was trading 0.1 percent lower at $1.3109.

Oil prices tracked the broader market trends Monday, with benchmark oil for March delivery down 58 cents at $97.26 a barrel in electronic trading on the New York Mercantile Exchange.

Greece will likely remain the focal point over the week, though a raft of corporate earnings, particularly in Europe, and central bank meetings could garner some interest. The European Central Bank’s monthly policy meeting on Thursday could be crucial in determining market expectations of whether there will be further interest rate reductions. Meanwhile, many traders think the Bank of England will clear the way to inject more money into the U.K. economy in the hope of boosting lending.

Earlier Asian shares mostly traded higher as investors there had their first chance to respond to join in the advance generated by Friday’s upbeat jobs data.

Japan’s Nikkei 225 index rose 1.1 percent to close at 8,929.20, its highest closing in more than three months but Hong Kong’s Hang Seng lost 0.2 percent to 20,709.94. Benchmarks in Singapore and mainland China also rose.