World stocks hovered near a 5-1/2 month high on Friday as investors anticipated an imminent conclusion to Greek debt talks while lower Spanish bond yields and a fall in Italy's six-month borrowing costs also supported the euro.
Sentiment was also buoyed by expectations that upcoming U.S. data would show the world's largest economy grew at its fastest pace in nearly two years at the end of 2011. . Stock futures pointed to a steady market open on Wall Street.
EU Economic and Monetary Affairs Commissioner Olli Rehn said talks with private creditors on restructuring Greek debt are very close to closing. Athens needs a deal quickly to avert an unruly default when a major bond redemption comes due in March, an outcome which could wreak havoc across financial markets.
The mark-up investors charge other indebted European economies to issue bonds also eased, with Italy's six-month borrowing costs falling below 2 percent at an auction, their lowest since May, thanks to appetite from mainly domestic banks flush with European Central Bank funds. Spanish 10-year government bond yields also fell to their lowest since November 2010.
We could see the market going higher if there was a positive outcome as far as the Greek debt talks are concerned, said Keith Bowman, equity analyst at Hargreaves Lansdown, although he cautioned a deal would not solve the broader issues of fiscal support across the union.
The MSCI world equity index <.MIWD00000PUS>, which has gained more than 5 percent in January, erased earlier losses to stand unchanged on the day. The benchmark index hit its highest level since August on Thursday after the Federal Reserve pledged to keep interest rates near zero for the next three years.
European stocks <.FTEU3> inched up to also hover at five-month highs while emerging stocks <.MSCIEF> rose further to new three-month peaks.
U.S. stock futures S&P 500 inched up 0.01 percent, while Dow Jones futures rose 0.1 percent and Nasdaq 100 futures were up 0.4 percent at.
Brent crude oil rose 0.3 percent to $111.65 a barrel. Bund futures were little changed after hefty gains on Thursday.
Ten-year Spanish government bond yields fell 14 basis points to 4.85 percent, narrowing the yield spread against German Bunds to 297 basis points.
Portuguese five- and 10-year government bond yields hit euro-era highs of 20.28 percent and 15.18 percent respectively.
The dollar <.DXY> fell a quarter percent against a basket of major currencies. The euro rose 0.2 percent to $1.3134.
After weeks of wrangling over the coupon that Greece will pay on new bonds it will swap for existing debt, the focus has shifted to whether the ECB and other public creditors will follow private bondholders in swallowing losses.
Euro zone members may have to increase their financial support for Greece if Athens and the private sector do their part to address the country's debt crisis, Eurogroup head Jean-Claude Juncker told a newspaper.
Italy, on the other hand, has enjoyed a recent rapid decline in yields, mostly driven by demand from domestic banks holding the ECB's cheap three-year loans.
Italy has seen some relief, said Michael Hewson, market analyst at CMC Markets.
The yen was on track to post its biggest daily gain in a month against the dollar, rising beyond 76.90. The dollar hit a two-month high of 78.29 yen on Wednesday after Japan reported its first annual trade deficit since 1980.
Investors are now awaiting the U.S. report on fourth quarter GDP growth, due at 1330 GMT (1:30 p.m. British time), which is expected to show growth accelerated to a 3 percent rate from 1.8 percent in the third.
The hope is the data will show that the U.S. economy is not slowing down in line with Europe.
If you get disappointing GDP figures, investors will take profits and European stocks could fall about 1 percent. If it's better than expected, you could see a gain of 0.5 to 1 percent, said Koen De Leus, strategist at KBC Securities.
(Additional reporting by Natsuko Waki and Anirban Nag; Editing by Catherine Evans and Toby Chopra)