Stock markets rose Wednesday despite a downgrade of two of France's biggest banks, with traders hoping for some progress on Greece's debt crisis emerging from a teleconference later between the leaders of Greece, France and Germany.
Following days of uncertainty in the markets as to whether Greece will get the next batch of bailout funds to say afloat beyond next month, Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel were talking, once again, on the crisis that won't go away.
The teleconference Wednesday evening will go a long way to determining market expectations as to whether Greece will default on its mountain of debts any time soon.
On Tuesday, Merkel sought to ease market fears that Greece would be allowed to default following suggestions from some in her own coalition government that the country should effectively be allowed to go bust. Her robust criticism of those default rumors has helped shore up markets over the past 24 hours or so.
Still markets remain alert to the possibility that once again, Europe will fail to provide a coordinated response to Greece's debt crisis and the prospect of a debt default.
"Merkel is struggling to keep the various factions, not only in her government, but also in Europe in line, warning against careless talk in such a feral environment warning of the serious consequences that an 'uncontrolled insolvency' would bring," said Michael Hewson, markets analyst at CMC Markets.
Stocks have also managed to brush aside the Moody's downgrade of French banks Societe Generale and Credit Agricole, and a warning that the two of them _ and BNP Paribas too _ could have their credit ratings downgraded further.
There had been fears that the downgrades would be even harsher.
"For me, it's relatively good news," Christian Noyer, the governor of the Banque de France, told French radio RTL. "First, because it's a very limited downgrade, only on two out of three banks, and especially since Moody's rates them better than the other two agencies (Standard & Poor's and Fitch), so, in reality, it put them at the same level or even slightly higher than the other agencies."
Speculation that they would be downgraded by Moody's was one of the reasons why markets have been so volatile this week.
"The Moody's rating downgrades on the French banks seems to have removed at least one element of uncertainty that had been haunting many in recent days," said Ben Critchley, a sales trader at IG Index.
As a result, the three bank stocks largely held their own Wednesday, and the CAC-40 in France was 1.4 percent higher at 2,934.
Elsewhere in Europe, Germany's DAX was 1.6 percent higher at 5,248 while Britain's FTSE 100 index rose 1.1 percent to 5,230.
Greece's main market was outperforming its counterparts, trading 2.3 percent higher.
The euro was also fairly calm after a big reverse over the past week or so _ it was trading flat at $1.3680.
U.S. stocks were expected to open modestly lower after two days of gains _ Dow futures fell 0.2 percent to 11,003 while the broader Standard & Poor's 500 futures fell 0.1 percent to 1,164.
U.S. retail sales figures may well determine how Wall Street opens _ as well as worries about Europe's debt crisis, concerns over the U.S. economy have also been behind the recent turmoil in markets.
Earlier in Asia, Hong Kong's Hang Seng reversed early declines to eke out a 0.1 percent gain to 19,045.44, while mainland China's Shanghai Composite Index also staged a comeback to gain 0.6 percent to 2,484.83.
South Korea's Kospi was the biggest loser, declining 3.5 percent to 1,749.16 as movements were magnified after a two-day holiday.
In the oil markets, prices dropped back from $90 amid some profit-taking _ benchmark oil for October delivery was down $1.03 to $89.18 per barrel in electronic trading on the New York Mercantile Exchange.
Kelly Olsen in Seoul, South Korea contributed to this report.