Shares struggled but the euro recovered on Thursday, as markets were left without a clear direction after Greek political leaders failed again to conclude a deal for a bailout package, which Athens needs to avoid a messy debt default.

Talks would continue with one issue left to be resolved, so a deal could be concluded before a meeting of euro zone finance ministers on Thursday, Prime Minister Lucas Papademos said in a statement.

Greek officials said pension cuts were the sticking point. Greek political leaders agreed to cut the minimum wage by 22 percent but managed to prevent holiday bonuses from being scrapped.

MSCI's broadest index of Asia Pacific shares outside Japan trimmed earlier losses to stand nearly flat at 445.95, after climbing to a six-month high of 446.62 the day before. The index has gained about 25 percent from an October 4 low when fears about a Greek default and contagion in the euro zone were at their peak.

European shares are likely to rise, however, with financial spreadbetters expecting Britain's FTSE 100, Germany's DAX and France's CAC-40 to open about 0.1-0.5 percent higher.

Asian stock markets are resilient, suggesting maybe players are more confident that Greece's woes will be contained even if there was a default, as the European Central Bank's aggressive liquidity provisions have had an enormous impact in stabilising the markets since the start of the year, said Hirokazu Yuihama, senior strategist at Daiwa Capital Markets.

Japan's Nikkei was down 0.2 percent, slipping from a three-month high reached on Wednesday.

The euro hit a two-month high above $1.3300 on Thursday.

Asian credit markets were cautious, with the spreads on the iTraxx Asia ex-Japan investment grade index widening by 3 basis points on Thursday.

TIME FOR CORRECTION?

The ECB's generous funding operations in December eased fears about a credit crunch in Europe, helping to drive down European interbank lending rates as well as yields on sovereign debt issued by highly indebted euro zone countries.

A solution to the long-awaited Greek debt restructuring, after months of wrangling, could spur a rally but profit-taking may follow because many markets are nearing key resistance.

Volatility is poised to pick up, suggesting the recent risk-positive sentiment may face a short-term pullback.

The CBOE Volatility index VIX .VIX, which measures expected volatility in Wall Street's S&P 500 over the next 30 days, closed at 18.16, near an upper limit of a technical range between 15.75 and 18.75. A fall towards the lower end would suggest a continuation of the risk rally, analysts said.

Short-term plays are moving markets, with the underlying tone staying bearish because even after a deal is reached, it takes a long time to resolve Greece's fiscal problems given that there is no quick remedy for the structural issue, said Xiao Minjie, chief economist at FuNNeX Asset Management in Tokyo.

Markets will take cues from positive news supporting U.S. markets and negative news weighing on the euro zone, and the best risk hedge under such circumstances is to take profits when prices rise and hunt for bargains after they drop, he said.

CHINA CPI, CENTRAL BANKS

Reaction was muted on China's faster-than-expected annual inflation rate of 4.5 percent in January, above a 4.1 percent rise forecast. The outcome dampened expectations of an imminent move by the central bank to cut banks' required reserve ratios (RRR), the level of cash they must hold in reserve.

This number will probably delay RRR cuts, in fact there's a lower chance of an RRR cut now. But inflation pressure is still there, especially since domestic oil prices are higher now. It's still a concern, said Hao Zhou, economist at ANZ in Shanghai.

The ECB and the Bank of England hold policy meetings later in the day.

The British central bank is seen adding an extra 50 billion pounds of stimulus via bond purchases while the ECB is expected to hold rates steady but may signal it is ready to cut in March.

Today's meeting of the Bank of England's MPC may provide another official boost to market sentiment and global financial liquidity, Barclays Capital said in a note.

Oil firmed, with Brent up 0.2 percent to $117.43 a barrel, extending gains for an eighth straight session. U.S. crude added 0.3 percent to $98.97.