"The outcome of the EU summit was disappointing in the sense that a resolution to the plans for a bigger and better (rescue fund) has been delayed until June," said Rabobank analyst Jane Foley.

"Also, Portugal entered into political crisis which triggered a round of credit ratings downgrades and probably moves the country closer to requesting an EU bailout," she added. Standard & Poor's warned Monday that it could further downgrade Portugal's credit rating by a notch this week, after lowering it by two levels last week following the government's resignation. The yield, or return on investment, on Portugal's 10-year bonds rose sharply to 7.818 percent, coming off a record 7.94 percent during the day but still well up from 7.677 percent on Friday. Chancellor Merkel's weekend defeat in German state elections also weighed on sentiment.

"This defeat has raised concerns that German politicians may not have the support of the German people and this could call into question Germany's role as Europe's cash machine with respect to the bailout fund and any future agreements," Hewson said. The dollar also slumped to a record low against the Australian dollar as the US growth data boosted investor appetite for risky assets. The Aussie jumped to $1.0310 on Monday, it’s highest since the unit was floated in 1983. In London late Monday, the euro changed hands at $1.4106 against $1.4081 in New York late Friday, at 115.22 yen (114.57), £0.8804 (0.8781) and 1.2941 Swiss  francs (1.2945). The dollar stood at 81.68 yen (81.31) and 0.9175 Swiss francs (0.9191). The pound was at $1.6018 (1.6036). On the London Bullion Market, the price of gold slid to $1,417 an ounce from $1,436 late Friday.