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.
France's largest listed bank is aiming to dispose of up to $11 billion of loans to oil and gas companies, the Financial Times reported.
Businessman Francesco Gaetano Caltagirone has bought a stake in UniCredit, a source close to the situation said without saying what size the stake was.
The former head of the European Central Bank, Jean-Claude Trichet, was nominated to the Franco-German-led group's board as the industrial pillar approved a long-awaited reshuffle that will see Airbus chief Tom Enders become chief executive.
France's Arnaud Lagardere eased near-term uncertainty over the structure of EADS by ruling out a quick sale of his company's stake in the European aerospace group as he stepped up to become its chairman in waiting.
The Chief Executive of Qatar Airways said he was confident Airbus would fix the cracks discovered on the wings of its flagship A380 superjumbo but did not rule out delaying delivery if the problem persists.
The U.S. Pentagon unveiled a 2013 budget plan that would cut $487 billion in spending over the next decade.
The media-to-aerospace group's CEO told le Figaro newspaper it would soon announce a partnership in sports rights management with Qatar, whose sovereign wealth fund is its biggest shareholder. Qatar has made big investments in the Paris St. Germain football team and acquired costly TV rights to game in France in the past year, so could seek to link those initiatives to Lagardere's own sports marketing and rights business.
The German airline reached an agreement with unions to hike wages by 3.5 percent for 33,000 of its German staff.
The outdoor advertising specialist saw its growth slow last year as Europe's debt crisis took its toll on the region where it earns two-thirds of its revenue.
The French nuclear group posted a 2.6 percent fall in 2011 sales as strength in its mining unit helped cushion declines in its core reactor businesses as it restructured following the nuclear disaster in Japan.
A federal judge said BP Plc
(Reporting by Blaise Robinson; Editing by James Regan)