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NEW YORK (Reuters) - Stock index futures fell in a shortened session on Monday and cash equity trading was canceled as powerful Hurricane Sandy bore down on the U.S. East Coast, closing equity trading for Tuesday. Monday's shutdown was the stock market's first weather-related closure in 27 years. U.S. stock markets will remain closed on Tuesday, the operator of the New York Stock Exchange said, depending on the damage from the huge and dangerous storm on financial center New York City overnight and on Tuesday.

Index futures stopped trading electronically at 9:15 a.m. (1315 GMT), but will reopen at 7 p.m ET for the overnight session during European and Asian hours, closing again at 9:15 a.m. Tuesday morning. NYSE Euronext (NYX.N) and Nasdaq OMX Group (NDAQ.O) said they made their decision in consultation with industry executives and regulators, and intend to reopen Wednesday, conditions permitting. Sandy, a mammoth storm, took aim at the most densely populated U.S. Northeast Coast on Monday, forcing hundreds of thousands to seek higher ground, halting public transport and closing schools, businesses and government departments.

Italian political turmoil and Spanish hesitancy over seeking euro-zone assistance put the two countries on the front line of the region's debt crisis and back under market pressure on Monday as their leaders met in Madrid. "We have an illiquid market, we have a risk-off situation from overseas, and we have some issues going on in the States with Sandy, so that is impacting things a little more than expected," said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.

S&P 500 futures fell 4.9 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 69 points and Nasdaq 100 futures fell 15.75 points. Futures closed well off their session lows. S&P 500 futures fell more than 10 points at the intraday low. The storm forced the closure of U.S. stock markets on Monday, the anniversary of the 1929 stock market crash.

A market closure for more than a day may start causing problems for investors who need to trade in and out of positions, investors said. "If you go two days, you really start to create some serious financial stress for some players that need to get something done," said Jim Paulsen, chief investment officer of Wells Capital Management in Minneapolis. "A two-day closure will create more stress, and therefore will allow electronic trading. That's my best guess."

In Europe, Spanish and Italian bond yields rose and German Bund futures hit two-week highs on Monday, partly prompted by former Italian Prime Minister Silvio Berlusconi's threat to bring down the Rome government. Greece's foreign lenders have refused to make any further concessions on changes to labor laws contested by a junior coalition partner, the country's finance minister said on Sunday, prolonging an impasse on a crucial austerity package.

Athens has been locked in talks with its EU and IMF lenders on the austerity package for months, but a final agreement has been held up by the small Democratic Left party's refusal to back the new wage laws. European shares fell for the first time in four sessions on Monday, hit by worries over weak company results. The FTSEurofirst 300 index (.FTEU3) fell 0.3 percent to close at 1,093.57 points and the euro zone's blue-chip Euro STOXX 50 index <.STOXX50E> fell 0.7 percent to 2,478.84 points.