EUROPEAN CENTRAL BANK

Greece's tortuous negotiations over a debt swap with private creditors entered a new phase on Thursday with focus on how much the European Central Bank and other public creditors may need to contribute.

Stock index futures rose on Thursday, adding to gains from the previous session when the Federal Reserve boosted equities by saying it was likely to keep interest rates near zero until at least late 2014.

Italy's borrowing costs dropped sharply as it sold the maximum amount of 5 billion euros at an auction of short-term debt on Thursday, helping drive down yields on its longer-dated bonds ahead of a crucial sale of five- and 10-year paper on Monday.

Greece resumes tortuous negotiations on a debt swap with private creditors in Athens on Thursday, with all eyes on the European Central Bank after IMF chief Christine Lagarde said public sector holders of Greek debt may need to take a haircut too.

The European Central Bank has ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit, central bank sources told Reuters on Wednesday.

World stocks and the euro suffered on Wednesday as uncertainty about Greece's debt talks overshadowed strong economic data from Germany, blow-out earnings from Apple, and expectations that the Federal Reserve will push back the timing of an eventual rate hike.

Greece hoped on Wednesday it could wrap up tortuous negotiations on a debt swap as early as this week when private creditors return to Athens for a fresh round of talks to avert a chaotic default.

Greece's private creditors pleaded Tuesday with European officials who rejected their bond swap offer to hammer together a deal before Athens tumbles into a chaotic default.

European shares were flat on Monday morning ahead of a meeting of euro zone financeministers to discuss terms of a Greek debt restructuring deal, with banks rallying on a report about easier capital rules.

Eurozone finance ministers will decide on Monday what terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens after negotiators for private creditors said they could not improve their offer.

European Union ministers meeting on Monday will attempt to reach agreement on a new treaty enforcing stricter budget controls in the Eurozone that could allow the bloc's highest court to fine countries that do not adopt key rules.

European banks are preparing for a potential worsening of the region's sovereign and banking crisis, with many firms stockpiling cash and cutting back on loans to new clients as they seek to protect themselves against a possible seizing-up of financial markets.

European banks are preparing for a potential worsening of the region's sovereign and banking crisis, with many firms stockpiling cash and cutting back on loans to new clients as they seek to protect themselves against a possible seizing-up of financial markets.

Spain passed its biggest test of market sentiment so far this year on Thursday, selling far more longer-term debt than expected as the government pressed ahead with efforts to tackle its problems with the help of a European Central Bank backstop.

A German sale of 3.44 billion euros of two-year bonds saw strong demand on Wednesday as concerns over Greece led investors to stock up on safe-haven debt, while Portuguese treasury bills benefited from ample liquidity in the financial system.

Spain took in its stride the first test of investor appetite for its debt since a two-notch credit ratings downgrade, selling short-term paper ahead of a far trickier hurdle later this week, when it tries to place longer-dated bonds.

German Investor confidence rose sharply in January as cheap, long-term loans provided by the European Central Bank soothed the financial markets, suggesting that the economy is stabilizing.

Consumer prices in the Eurozone fell more than previously expected in December, the start of a retreat from a November peak that should give the European Central Bank more room to cut interest rates as the economy heads for recession.

Spain sold 4.88 billion euros ($6.18 billion) of 12- and 18-month T-bills on Tuesday, passing the first test of market appetite for its debt since a two-notch sovereign rating downgrade on Friday.

Asian shares inched higher and the euro stayed above a 17-month trough Tuesday as investors focused on economic data from China to gauge the impact of the eurozone debt crisis on global growth.

Germany, the only major eurozone member to retain a top-notch credit rating, refused Monday to consider boosting the bloc's rescue fund, while Greece was under pressure to urgently break a deadlock in debt swap talks if it is to avoid an unruly default.