Greece's borrowing costs fell on Thursday and the euro was off its one-year low on optimism that a bailout plan for Athens would be finalized soon, though Spain's risk premium rose after S&P's debt rating downgrade.

Global equities drifted higher after two days of losses, supported by the U.S. Federal Reserve's assurance that it would keep interest rates low for an extended period, and robust company earnings.

Crude prices steadied above $83 a barrel and copper advanced 0.4 percent.

Ratings agency Standard & Poor's on Wednesday downgraded Spain by one-notch to AA. The fourth-largest euro zone economy became the third euro periphery country to be downgraded by this rating agency this week.

Greece, which is struggling under a pile of debt and has requested aid from the European Union and the International Monetary Fund, and Portugal were downgraded on Tuesday.

The euro had tumbled to a one-year low versus the dollar of $1.3113 on Wednesday, knocked down after Spain's downgrade. The single currency steadied at $1.3215.

The market sees a bigger package for Greece, covering three years, as a bigger backstop. This is helping to address some investor fears and giving some support for the euro, said Kenneth Broux, market economist at Lloyds Banking Group.

But in the bigger picture the euro remains under pressure and I'd continue to sell rallies, he said.

European Central Bank Governing Council member Axel Weber said on Thursday there was no acceptable alternative to rescuing Greece and urged quick approval of the aid package to prevent market upheaval and contagion to other states.

The premium investors demand to hold 10-year Greek government bonds rather than euro zone benchmark German Bunds narrowed to 775 basis points from 800 bps at Wednesday's settlement close.

Spain's borrowing cost rose to 127 bps above Bunds, compared with 117 bps on Wednesday.

FED, EARNINGS, M&A HELPS

World stocks measured by the MSCI All-Country World Index added 0.1 percent.

In Europe, the FTSEurofirst 300 <.FTEU3> index advanced 0.2 percent, while Greece's share benchmark <.ATG> rose 3.6 percent after the country's securities regulator on Wednesday banned short-selling and Spain's IBEX 35 <.IBEX> put on 1.1 percent.

Shares were also supported after the Fed maintained the extended period language and slightly upgraded some of their economic forecasts, Hewlett-Packard's $1.2 billion deal to buy Palm Inc and relatively strong corporate earnings.

Among the companies that reported strong quarterly figures, consumer goods group Unilever beat forecasts with a rise in underlying sales and ArcelorMittal , the world's largest steelmaker, forecast a sharp pick-up in the second quarter due to higher demand and prices in all main markets.

There is pain caused by the fiscal situation in Europe, but the underlying economic situation is firming up and if the news flow is not absolutely negative, it will allow investors to focus on the underlying trends, said Gilles Moec senior European economist at Deutsche Bank.

(Additional reporting by Neal Armstrong, Simon Falush and George Matlock in London; Editing by Neil Stempleman)

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