European stock index futures pointed to a lower open on Friday, with stocks set to trim some of the previous day's sharp gains, as investors await the outcome of crucial Greek debt talks as well as Italy's short-term debt auction before chasing stocks higher.

At 0728 GMT, futures for the Euro STOXX 50, for Germany's DAX and for France's CAC were down 0.4-0.5 percent.

On Thursday, Greece and its private creditors made progress in talks on restructuring its debt, both sides said, and they will continue negotiating on Friday with the aim of sealing an agreement within a few days.

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 European Central Bank 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.

If Greece's ability to sustain debt is proven and there is an overall understanding with the private sector, then the public sector will also have to ask itself if it will not provide help, he told Austrian paper Der Standard in an interview published on Friday.

The euro zone's blue-chip Euro STOXX 50 <.STOXX50E> index has surged nearly 13 percent over the past six weeks, hitting a 3-month high on Thursday and testing its 200-day moving average, a key resistance level.

The rally since mid-December has pushed the index's valuation ratio to a level not seen in six months, trading at 8.9 times 12-month forward earnings, albeit still well below a 10-year average price-to-earnings ratio of 11.8.

However, while worries surrounding debt-stricken Greece have been abating, investors' focus has been switching to Portugal this week, seen as the potential next domino in the euro zone debt crisis.

Portuguese five- and 10-year government bond yields hit euro-era highs on Thursday on jitters the country will require another bailout or restructure its debt.

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.

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 has seen some relief in its borrowing costs as 10-year bond yields slid down towards 6 percent yesterday. Shorter-term borrowing costs have also fallen back sharply as Italy managed to get 4.5 billion euros of 2014 bonds away at significantly reduced yields, while today's auction of 8 billion euros of 6-month bills and 3 billion euros of 11-month bills, should see similar falls in yields, Hewson said.

In a note to clients on Friday, UBS strategists said they remained cautious on stocks in the short term.

Short-term indicators suggest sentiment has shifted into the bullish camp and economic surprises are now looking stretched. It will be difficult to maintain the pace of positive newsflow and we fear the market's focus may soon return to the implications of the euro zone sovereign debt crisis, they wrote.



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(Reporting by Blaise Robinson; Editing by James Regan)