The euro clawed off a one-year low against the dollar on Friday on news that Greece will ask for financial aid while European stocks snapped a two-day fall, also helped by upbeat corporate earnings.
Greek media said Athens is poised to trigger the European Union/International Monetary Fund financial aid package, citing unnamed sources.
The FTSEurofirst 300 <.FTEU3> index of top European shares climbed 0.9 percent, rebounding from a three-week closing low and world stocks as measured by MSCI <.MIWD00000PUS> erased losses to be up 0.2 percent.
Financial shares <.SX7P> jumped more than 1 percent.
With liquidity in Greek bonds practically dried up and the yield on a two-year Greek paper indicated above 10 percent, many market players say the debt-ridden country has no alternative but to seek financial aid soon.
There is no way Greece can refinance at the rates they have to pay, said Kenneth Broux, market economist at Lloyds TSB in London.
Greek debt became the most expensive in Europe to insure on Thursday after European Union data showed Greece's 2009 budget deficit was larger than expected and Moody's cut the country's credit ratings by one notch to A3 and warned of further downgrades.
Steven Bell, director at hedge fund GLC, said the sharp deterioration in Greece's situation has led to contagion fears.
But supportive events tend to happen over the weekend, and we've had some stunningly good earnings numbers, he said.
Shares in Volvo soared 11 percent after the world No. 2 truck maker's first-quarter profit beat expectations.
The euro bounced off a one-year low against the dollar, further helped by data showing a jump in German business sentiment.
It was last at up 0.1 percent at $1.3304, having earlier skidded to $1.3201, its weakest since April 2009.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, rose to 101.6 from an upwardly revised 98.2 in March, beating market expectations.
Meanwhile, the Australian dollar struggled to find a firmer footing after falling on comments by Reserve Bank of Australia governor suggesting the pace of interest rate hikes might slow.
The currency fell 0.5 percent to $0.9229, having earlier fallen as much as 1 percent to $0.9184.
(Additional reporting by Simon Falush and Naomi Tajitsu, editing by Mike Peacock)