NEW YORK (Reuters) – Coca-Cola Co reported better-than-expected quarterly results and announced a new cost-savings program on Tuesday that it will use to boost its brands and mitigate higher commodity costs.

Coke’s results were “solid” given the weak global economy, said Consumer Edge Research analyst Bill Pecoriello. In particular, a 1 percent increase in North American sales volume was better than the 1 percent decline Pecoriello expected.

“Key issues heading into 2012 include managing against continued tough global macroeconomic conditions, commodity inflation, foreign exchange headwinds and stepped-up competitive spending,” Pecoriello said.

Rival PepsiCo is expected to release its own business plan on Thursday when it reports its results. Analysts expect Pepsi’s plan to include cost cutting and stepped-up investment in brands as a way to narrow the gap with Coke in North America.

Coke’s beverage business has been outperforming PepsiCo’s in recent months in North America, where a weak economy and growing health consciousness curbed demand for sugary soft drinks. At the same time, the company has a much greater international footprint than PepsiCo, which has helped its overall results.

For a graphic on Coke results: http://link.reuters.com/guz46s

In addition to slack consumer spending, both companies have been facing higher costs for raw materials like corn sweetener and packaging. Analysts expect costs to be up in 2012 as well, but to a smaller degree than last year.

Coke’s new productivity program is targeting annual savings of $350 million to $400 million by the end of 2015. The company also raised its target for savings from the integration of its North American bottling operations by $200 million to $250 million.

Total costs associated with the integration will increase from $425 billion to about $800 million, the company said.

Together, these initiatives should generate $550 million to $650 million a year by the end of 2015.

Coke plans to reinvest those savings into “brand building initiatives,” which usually include marketing and advertising, and said they will help mitigate potential near-term commodity inflation.

Coke said global revenue rose 5 percent in the fourth quarter to $11.04 billion as it gained market share in several drink categories. Analysts on average were expecting $10.99 billion.

Worldwide volume rose 3 percent, growing 4 percent in Latin America and Eurasia and Africa, 5 percent in the Pacific and 1 percent in Europe and North America.

Quarterly net income was $1.65 billion, or 72 cents per share, down from $5.77 billion, or $2.46 per share, a year earlier, when the company recorded a gain related to the acquisition of its North American bottling operations.

Excluding items, earnings were 79 cents per share, beating the average estimate of 77 cents a share, as compiled by Thomson Reuters I/B/E/S.

Also on Tuesday, bottler Coca-Cola Enterprises raised its quarterly dividend by 23 percent to 16 cents per share.

Coca-Cola shares were up 11 cents to $68.140 in early trading on the New York Stock Exchange.

(Reporting By Martinne Geller in New York; Editing by Maureen Bavdek and Mark Porter)

TOKYO (Reuters) – Markets edged down on Tuesday as Greek resistance to the strict conditions attached to a bailout fund sapped recent momentum spurred by hopes the global economy is improving, and the euro eased on renewed fears of a messy debt default.

The Australian dollar leapt to a six-month high but stocks turned negative after the central bank held rates steady at a review. Markets had positioned for a rate cut.

Opinion remained split over whether the wrangling over Greece’s debt restructuring talks would eventually be resolved or trigger contagion across other vulnerable euro zone countries, tempering risk-taking investments.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.4 percent to its highest in more than five months, before reversing direction to stand down 0.2 percent.

Japan’s Nikkei average fell 0.3 percent, slipping from a three-month high just shy of 9,000 hit on Monday.

“Concerns over the Greece issue are limiting real risk taking from investors, even if the environment generally appears to be improving,” said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.

“I’d expect all concerned parties to eventually strike a deal because it is in nobody’s interest if Greece defaults. But a further delay in the debt talks will really hamper sentiment,” he said.

After resisting terms of a proposed new bailout deal which demands strict labor reforms and other austerity steps, Greek political leaders face crunch talks on Tuesday to clinch an agreement needed to avoid a debt default.

The full package must be approved by the euro zone, the European Central Bank and the International Monetary Fund before February 15 in order to complete legal procedures for a bond swap deal for a March 20 bond redemption.

Moreover, some euro zone countries require parliamentary approval to raise the bailout money.

The euro eased 0.2 percent to $1.3110, having recovered from an overnight low of $1.3026.

The dollar was up 0.3 percent against the yen at 76.72. Data from Japan’s Finance Ministry on Tuesday confirmed that Tokyo conducted stealth foreign exchange intervention in October-December, even after a massive intervention on October 31 when the yen hit a record high around 75.31.

The Australian dollar jumped more than one cent to a six-month high $1.0812 from after the Reserve Bank of Australia unexpectedly kept interest rates steady at 4.25 percent at a policy review released at 10:30 p.m. EST.

Market players had expected a 25 basis point cut due to global growth concerns and a benign inflation environment.

Australian shares fell 0.4 percent, turning negative from being up 0.1 percent just before the rate announcement.

Commodities stabilized after falling the day before when the dollar firmed.

U.S. crude futures inched up above $97 a barrel after falling nearly $1 on Monday, while Brent extended gains to above $116 a barrel, supported by increased demand for heating fuel due to cold weather in Europe and persistent supply concerns.

Spot gold was up 0.2 percent to $1,723 an ounce, helped by a modest recovery in equities.

But Asian credit markets remained subdued, with the spreads on the iTraxx Asia ex-Japan investment grade index little changed, after tightening sharply on Monday.

Analysts expect consolidation in several markets which have recently climbed to near resistance levels, which may then pave the way for a break higher.

India’s main 30-share BSE index is expected to find major resistance at 17,908, a high in October, after rising as high as 17,829 on Monday.

Shanghai shares need to break above 2,360 for an eventual move higher, while a fall below 2,240-50 will reset the downtrend. The shares fell 1.4 percent to 2,297 on Tuesday.

Emori said gold and oil have more upside scope than other assets.

Interbank lending rates in Europe continued to improve despite the Greece issue, largely due to the ECB’s generous funding in December and expectations ahead of another such liquidity operation scheduled for later this month.

Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, fell on Monday to 1.094 percent from 1.102 percent, hitting the lowest level since late February last year.

(Additional reporting by FX analyst Krishna Kumar in Sydney; Editing by John Mair)

TOKYO (Reuters) – Markets edged down on Tuesday as Greek resistance to the strict conditions attached to a bailout fund sapped recent momentum spurred by hopes the global economy is improving, and the euro eased on renewed fears of a messy debt default.

The Australian dollar leapt to a six-month high but stocks turned negative after the central bank held rates steady at a review. Markets had positioned for a rate cut.

Opinion remained split over whether the wrangling over Greece’s debt restructuring talks would eventually be resolved or trigger contagion across other vulnerable euro zone countries, tempering risk-taking investments.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.4 percent to its highest in more than five months, before reversing direction to stand down 0.2 percent.

Japan’s Nikkei average fell 0.3 percent, slipping from a three-month high just shy of 9,000 hit on Monday.

“Concerns over the Greece issue are limiting real risk taking from investors, even if the environment generally appears to be improving,” said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.

“I’d expect all concerned parties to eventually strike a deal because it is in nobody’s interest if Greece defaults. But a further delay in the debt talks will really hamper sentiment,” he said.

After resisting terms of a proposed new bailout deal which demands strict labor reforms and other austerity steps, Greek political leaders face crunch talks on Tuesday to clinch an agreement needed to avoid a debt default.

The full package must be approved by the euro zone, the European Central Bank and the International Monetary Fund before February 15 in order to complete legal procedures for a bond swap deal for a March 20 bond redemption.

Moreover, some euro zone countries require parliamentary approval to raise the bailout money.

The euro eased 0.2 percent to $1.3110, having recovered from an overnight low of $1.3026.

The dollar was up 0.3 percent against the yen at 76.72. Data from Japan’s Finance Ministry on Tuesday confirmed that Tokyo conducted stealth foreign exchange intervention in October-December, even after a massive intervention on October 31 when the yen hit a record high around 75.31.

The Australian dollar jumped more than one cent to a six-month high $1.0812 from after the Reserve Bank of Australia unexpectedly kept interest rates steady at 4.25 percent at a policy review released at 10:30 p.m. EST.

Market players had expected a 25 basis point cut due to global growth concerns and a benign inflation environment.

Australian shares fell 0.4 percent, turning negative from being up 0.1 percent just before the rate announcement.

Commodities stabilized after falling the day before when the dollar firmed.

U.S. crude futures inched up above $97 a barrel after falling nearly $1 on Monday, while Brent extended gains to above $116 a barrel, supported by increased demand for heating fuel due to cold weather in Europe and persistent supply concerns.

Spot gold was up 0.2 percent to $1,723 an ounce, helped by a modest recovery in equities.

But Asian credit markets remained subdued, with the spreads on the iTraxx Asia ex-Japan investment grade index little changed, after tightening sharply on Monday.

Analysts expect consolidation in several markets which have recently climbed to near resistance levels, which may then pave the way for a break higher.

India’s main 30-share BSE index is expected to find major resistance at 17,908, a high in October, after rising as high as 17,829 on Monday.

Shanghai shares need to break above 2,360 for an eventual move higher, while a fall below 2,240-50 will reset the downtrend. The shares fell 1.4 percent to 2,297 on Tuesday.

Emori said gold and oil have more upside scope than other assets.

Interbank lending rates in Europe continued to improve despite the Greece issue, largely due to the ECB’s generous funding in December and expectations ahead of another such liquidity operation scheduled for later this month.

Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, fell on Monday to 1.094 percent from 1.102 percent, hitting the lowest level since late February last year.

(Additional reporting by FX analyst Krishna Kumar in Sydney; Editing by John Mair)

LONDON (Reuters) – A dip in figures on China’s non-manufacturing sector helped dampen financial markets optimism on Friday ahead of U.S. jobs data that will offer more clues on the strength of the world’s top economy.

European shares and the euro traded within a narrow range, with nerves over the completion of a deal between Greece and its creditors – due on Monday – also helping dampen sentiment after a bullish start to the year.

The nonfarm payrolls report will be a key catalyst for shares as strong data would fuel growing hopes the global economy is on a firm recovery path, while a disappointing numbers could add pressure on the U.S. Federal Reserve to stimulate the economy, support appetite for riskier assets.

“A weak read will probably be interpreted as an indication that QE3 (a third round of quantitative easing) is needed to help the recovery,” Cameron Peacock, market analyst at IG Markets, said.

U.S. non-farm payrolls are forecast to rise by 150,000 after a 200,000 increase in December, with the unemployment rate seen static at 8.5 percent.

The MSCI world equity index, which despite the euro zone debt crisis is up nearly 7.4 percent this year was off about 0.8 percent at 321.62.

The FTSEurofirst 300 index (.FTEU3) of top European shares opened barely changed at 1058.51, just off six-month highs.

“Markets are taking cheer that America is improving. Companies are strong, but they don’t yet have the confidence to invest,” said Justin Urquhart Stewart, director at Seven Investment Management.

Investors are also on watch for possible monetary easing measures to be announced in China after the latest economic data showed the official Purchasing Managers Index for non-manufacturing sectors dipping to 52.9 in January from 56.0 in December.

The euro and the Australian dollar struggled to make much headway in Asia on Friday as the Chinese data weighed on sentiment. The euro was flat at around $1.3150, after hitting an intraday low of $1.3114 in Asia and just below six week highs of $1.3235 seen earlier this week.

(Additional reporting by Brian Gorman; editing by Patrick Graham)

NEW YORK (Reuters) – Stocks extended January’s rally on Wednesday after upbeat global manufacturing data boosted sentiment and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the world, though still not suggesting a booming expansion, has helped lift equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Optimism spurred gains in industrials, financials and basic materials, which rose between 1.1 percent and 1.7 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.3 percent to $110.52 and was the biggest boost to the Dow industrials.

Trading volume was higher than it has been in recent days. Volume of the NYSE, Amex, and Nasdaq was 7.80 billion compared to its 20-day moving average of 6.97 billion. The wider participation comes after four down days when market movements were minimal and volume generally light.

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default. Such a deal would be a significant step in removing one of the biggest worries for investors.

U.S. and European banks rallied on the news. Bank of America Corp (BAC.N) gained 3.2 percent to $7.36 and Citigroup (C.N) rose 2.9 percent to $31.60.

The Dow Jones industrial average (.DJI) gained 83.55 points, or 0.66 percent, to 12,716.46. The Standard & Poor’s 500 Index (.SPX) rose 11.67 points, or 0.89 percent, to 1,324.08. The Nasdaq Composite Index (.IXIC) climbed 34.43 points, or 1.22 percent, to 2,848.27.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.8 percent. Shares in PulteGroup Inc (PHM.N), the second largest U.S. homebuilder, rose 5.1 percent to $7.83.

Amazon.com Inc (AMZN.O) slid 7.7 percent to $179.46 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool Corp (WHR.N) surged 13.5 percent to $61.64 after giving an optimistic full-year outlook.

U.S. Treasuries prices fell on Wednesday as European risk assets improved, dampening demand for the safe-haven bonds, and as buying ebbed following a day of large month-end purchases.

Depressed Treasury yields, which point to caution on the part of investors, have been a reason for some to distrust a gain in stocks predicated on signs of an improving economy.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told IFR, a unit of Thomson Reuters.

Morgan Stanley shares gained 4 percent to $19.39.

(Additional reporting by Rodrigo Campos; Editing by Padraic Cassidy)

NEW YORK (Reuters) – Stocks extended January’s rally, climbing more than 1 percent on Wednesday after upbeat global manufacturing data and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the globe has helped lift world equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

Optimism over the economy spurred gains in industrials, financials and basic materials, which rose between 1.5 percent and 2 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.6 percent to $110.88 and was the biggest boost to the Dow industrials.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default.

U.S. and European banks rallied on the news. Bank of America (BAC.N) gained 3.5 percent to $7.39 and Citigroup (C.N) rose 4 percent to $31.94.

The Dow Jones industrial average (.DJI) gained 125.07 points, or 0.99 percent, to 12,757.98. The Standard & Poor’s 500 Index (.SPX) rose 15.62 points, or 1.19 percent, to 1,328.03. The Nasdaq Composite Index (.IXIC) added 37.31 points, or 1.33 percent, to 2,851.15.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.9 percent.

Amazon (AMZN.O) slid 7.9 percent to $179.10 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool (WHR.N) surged 17.7 percent to $63.91 after giving an optimistic full-year outlook.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told Reuters unit IFR.

Morgan Stanley shares gained 5.4 percent to $19.66.

(Reporting by Edward Krudy, additional reporting by Chuck Mikolajczak; editing by Kenneth Barry)

NEW YORK (Reuters) – Stocks extended January’s rally, climbing more than 1 percent on Wednesday after upbeat global manufacturing data and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the globe has helped lift world equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

Optimism over the economy spurred gains in industrials, financials and basic materials, which rose between 1.5 percent and 2 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.6 percent to $110.88 and was the biggest boost to the Dow industrials.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default.

U.S. and European banks rallied on the news. Bank of America (BAC.N) gained 3.5 percent to $7.39 and Citigroup (C.N) rose 4 percent to $31.94.

The Dow Jones industrial average (.DJI) gained 125.07 points, or 0.99 percent, to 12,757.98. The Standard & Poor’s 500 Index (.SPX) rose 15.62 points, or 1.19 percent, to 1,328.03. The Nasdaq Composite Index (.IXIC) added 37.31 points, or 1.33 percent, to 2,851.15.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.9 percent.

Amazon (AMZN.O) slid 7.9 percent to $179.10 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool (WHR.N) surged 17.7 percent to $63.91 after giving an optimistic full-year outlook.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told Reuters unit IFR.

Morgan Stanley shares gained 5.4 percent to $19.66.

(Reporting by Edward Krudy, additional reporting by Chuck Mikolajczak; editing by Kenneth Barry)

LONDON (Reuters) – Royal Bank of Scotland’s (RBS.L) Chairman Philip Hampton will not pick up a 1.4 million pound ($2.2 million) stock bonus, the bailed-out bank said, following public anger and political squabbling over a 1 million pound bonus for its chief executive.

Anger over bankers’ earnings has shown few signs of abating, with many still set for million pound salaries while elsewhere thousands lose their jobs as the global economy stutters in the face of Europe’s debt crisis.

In Britain, the salaries of top staff at RBS and Lloyds (LLOY.L) are particularly controversial because both banks were bailed out to the tune of 66 billion pounds during the credit crisis, with Britain ending up with an 83 percent stake in RBS along with a 40 percent holding in Lloyds.

“Sir Philip Hampton will not receive the 5.17 million shares he was awarded in 2009 when he joined RBS,” said a spokesman for the bank.

Based on RBS’s closing share price of 27.74 pence Friday, Hampton’s share-based award would have been worth 1.4 million pounds. In 2010, Hampton received a basic salary of 750,000 pounds, with no extra performance bonus or benefits.

The decision not to proceed with Hampton’s stock award comes after politicians from across the spectrum criticised the company’s decision to give its chief executive Stephen Hester a stock bonus worth roughly 1 million pounds.

Earlier this week, RBS halved CEO Hester’s stock bonus for 2011 to just under 1 million pounds from 2 million pounds in 2010, but resisted calls to axe the bonus altogether. Hester has a basic salary of 1.2 million pounds.

The decision by Lloyds chief executive Antonio Horta-Osorio to waive his bonus after he spent time off work on sick leave, had put further pressure on Hester to make a similar gesture.

CAMERON SEEKS TO DEFLECT CRITICISM OVER RBS PAY

RBS shares fell sharply over the course of 2011, losing approximately half their value, and the stock remains well below the average price of 49.90 pence at which the British taxpayer acquired its stake in the bank.

Hester has also had to cut more than 30,000 jobs since taking up his post in 2008, as part of a large-scale restructuring to sell off assets and businesses.

Britain’s Conservative-led coalition government has also been criticised for not doing more to curb Hester’s pay, facing attacks from not only the opposition Labor party but also from its own members.

Saturday, Prime Minister David Cameron sought to deflect criticism over his handling of the issue, arguing it would be worse for the taxpayer if RBS had to find a new management team.

“Let me get the facts straight, the fact is Stephen Hester was brought in by the last government, a contract signed by the last government, to turn round RBS, a bank that had got itself into a complete mess,” Cameron told television reporters.

“The government has made its views known, and that is why his bonus was cut in half compared to last year. But we do have to bear in mind that the alternatives to what is happening now could be even more expensive if you had a whole new team coming into RBS,” he added.

Hester joined RBS in October 2008 from property company British Land (BLND.L) as RBS was reeling from its disastrous acquisition of Dutch bank ABN AMRO.

Britain used some 45 billion pounds of taxpayers’ money to rescue RBS, leading to the eventual resignation of former head Sir Fred Goodwin, who was replaced by Hester.

Hester, who had previously worked at rival banks Abbey National and Credit Suisse (CSGN.VX), was given a brief to restructure RBS and return it to health, and RBS said he deserved his stock bonus for making the bank “safer.”

Britain aims to eventually sell its state holdings in RBS and Lloyds back to the private sector, although volatile financial markets have meant the timing of any disposal is uncertain.

(Reporting by Sudip Kar-Gupta; Editing by Tim Castle and Toby Chopra)

LONDON (Reuters) – Uncertainty over the outcome of talks to restructure privately held Greek debt limited gains in European shares and the euro on Monday ahead of a finance ministers meeting to decide the terms of further aid for Greece.

Private creditors said on Sunday they had come to the limits of what losses they could concede in a Greek debt swap, putting the ball in the court of the EU and the IMF in a tense race against the clock to avoid a messy default.

“It is uncertain what will happen with the restructuring of Greek debt, and after that there will be tough negotiations with the EU and the IMF about the next financing facility,” said Niels Christensen, currency strategist at Nordea in Copenhagen.

“The major risk to euro/dollar is to the downside, especially after the small bounce last week which took out some of the riskier short positions,” he said.

The impasse gave a lift to safe haven German government bonds in early trade but European shares, which notched a fifth straight week of gains last week, managed further gains helped by demand for banks.

Activity in the earlier Asian session was subdued due to the Lunar New Year holiday which had closed markets in China, Hong Kong, Singapore and South Korea.

The pan-European FTSEurofirst 300 (.FTEU3) index of top shares was up 0.4 percent at around 1,044.16 points while the STOXX Europe 600 banking index rose 1.3 percent. The broader MSCI world equity index was barely changed.

Equity markets have been gaining on rising hopes that a slowdown in the global economy would not be as bad as many had feared after signs of solid economic growth in the U.S. where several big corporations, including IBM and Intel, have released strong earnings figures.

The euro held steady at about $1.2938, below a 2-1/2 week high around $1.2986 hit on Friday, which itself was up nearly 3 percent from a 17-month trough near $1.2624 plumbed on January 13.

Rising hopes for progress in the euro zone debt crisis and broader risks receding were also highlighted by fresh money flowing into Europe Bond and China Equity Funds. These posted their biggest weekly inflow in more than two years, according to EPFR Global fund data on Friday.

In commodity markets Brent crude futures held steady around $110 on Monday as traders wait to see if European Union governments will agree on new economic sanctions against Iran over its nuclear program, including plans to phase in an oil embargo.

Gold jumped to its highest in more than a month as result of the uncertainty over of the Greek debt outcome and the growing geopolitical tensions.

Gold has risen more than 6 percent so far this year, but at current levels of around $1,668 an ounce, is down from its high of $1,672.89 seen in Asian trading.

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ECB bank borrowing/deposits: http://link.reuters.com/nyd85s

Euro zone liquidity levels: http://link.reuters.com/qeq25s

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(Additional reporting by Jessica Mortimer)