World stocks fell from a 5-1/2 month high on Friday as gains spurred by the Federal Reserve's pledge of low interest rates gave way to concerns about Portugal, seen as the next domino in the euro zone crisis, and uncertainty over Greek debt talks.
Portuguese five- and 10-year government bond yields were set to remain under pressure after hitting euro-era highs on Thursday as fears grow that the country may follow Greece in requiring another bailout or seeking to restructure its debt.
Athens is locked in tough negotiations with its private creditors on a restructuring it needs quickly to avert a disorderly default when a major bond redemption falls due in March. Greece's bondholders are demanding the European Central Bank contribute to a deal to put the country's messy finances back on track.
With all the focus on Greece, attention has also started to shift to Portugal, whose own bond yields are continuing to rise sharply, with 10-year yields pushing on towards 15 percent, as fears rise that it could well need a second bailout, said Michael Hewson, market analyst at CMC Markets in London.
The MSCI world equity index fell a quarter percent, after hitting its highest since August on Thursday after the Federal Reserve pledged to keep interest rates near zero for the next three years.
European stocks lost 0.4 percent while emerging stocks rose 0.3 percent.
U.S. crude oil fell 0.1 percent to $99.56 a barrel.
Bund futures rose 30 ticks.
The dollar rose slightly against a basket of major currencies. The euro fell 0.1 percent to $1.3091.
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 awash with three-year loans taken out from the European Central Bank. Italy will sell 8 billion euros of six-month bills and 3 billion euros of 11-month bills on Friday after a successful short-term bond auction on Thursday and before a key sale of longer-dated debt next week.
Italy has seen some relief, Hewson said.
(Editing by Catherine Evans)