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Pressures remained on investors to square out positions given the increasing uncertainty on when the crisis would be resolved, and with possibility of wide swings in prices and declining liquidity on the way.

Gold and copper rebounded from Thursday's sharp falls.

European leaders said they did not expect Sunday's meeting to give an all-cure solution to the euro zone's debt problems, with regional leaders still sharply divided over how to strengthen a euro zone rescue fund.

France and Germany said in a joint statement on Thursday that the leaders will discuss in detail a comprehensive solution to the euro zone crisis at the summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest.

Paris and Berlin wanted negotiations to start immediately with the private sector for an agreement on the sustainability of Greece's debt, according to the communique.

"Assets across the board are coming under pressure as it becomes clear that European banks, when faced with a stress test, will likely reduce their assets to strengthen their capital," said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co.

"This has prompted investors to cut their open positions to be neutral -- closing longs when the market is up, and closing shorts when the markets are down. Given a lack of substantial real money in the market, such a move opens the way for sharp swings in prices," he said.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS as well as Japan's Nikkei stock average .N225 were little changed. .T

The regional index had risen as much as 0.5 percent, with the materials sector .MIAPJMT00PUS -- the previous day's laggard, leading the rise as gold and copper rebounded.

"Until the European plan takes shape and investors are reassured, it's difficult for markets to make major moves, and trading should stick to recent ranges," said Hiroichi Nishi, general manager of the equity division at SMBC Nikko Securities.

COPPER, GOLD UP

The most-active U.S. gold futures contract rose more than 1 percent to $1,630.9 an ounce on Friday, following gains in spot prices, as arbitrage buying from the Shanghai market helped prices rebound from a decline of more than 1 percent in the previous session.

Three-month copper on the London Metal Exchange rose on Friday after its largest one-day collapse in four weeks in the previous session, when copper prices tumbled nearly 7 percent on fears of a double-dip recession and growing doubts that Europe will get a handle on its debt crisis.

"Gold's recent move is apparently tied to investors cashing in to offset declines in riskier assets, while industrial metals such as copper are closely linked to headline risks from Europe, which is a major market for China," Niimura said.

Oil was mixed, with Brent crude futures down 0.2 percent to $109.51 a barrel while U.S. crude futures rose 0.5 percent to $86.48 a barrel.

The euro inched up 0.1 percent against the dollar but looked set to stay in a tight range with traders wary of taking big positions ahead of the European summit.

Reflecting a lack of investor confidence in the progress to contain the European debt problems, the spread of bonds issued by the European financial stability facility and German government bonds widened further by several basis points on Thursday. The spread has widened by more than 20 basis points this week.

ASIAN CREDIT SUBDUED

With the market overall taking a wait-and-see stance on what kind of a solution the Sunday meeting would bring, activity was subdued in Asian credit markets, although more signs emerged that investors may be increasingly drawn to regional markets.

The spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, was a couple of basis points higher on Friday, after inching up about 10 basis points over the past week when investor jitters grew as the key euro zone meeting approached.

But the index fell by a sharp 58 points from this month's peak of 268 points hit when investors were dismissing any chance of European leaders making serious efforts on their debt woes.

Reflecting a somewhat improved sentiment since earlier this month, investor appetite remained strong for the Korean National Oil Corp's (KNOC) $1 billion, 5-year dollar bond issued earlier this week, with the bond trading at around 290/292 basis points over U.S. Treasuries, tightening further from Thursday.

"We are opening a touch weaker as there is confusion whether the upside from the resolution has been fully priced in. The new KNOC continue to trade tighter showing that guys still have money to put to work," said a Hong Kong based trader with an Asian bank.

In the samurai bond market, America Movil has made its debut with a 12 billion yen offer. Samurai bonds are yen-denominated bonds issued in Japan by a foreign borrower.

Non-Japanese issuers have been showing interest in tapping the samurai market, as yields on safe-haven Japanese government bonds have been pinned to historically low levels, helping contain issuance costs relatively at low levels, and Japanese investors are keen to receive premiums, provided the issuers meet their criteria.

U.S. stocks rose on Thursday even as world stocks as measured by MSCI .MIWD00000PUS fell 0.9 percent. European shares .FTEU3 ended down 1.4 percent on Thursday.

Data relieved fears that the U.S. economy might be heading for a recession, after the Philadelphia Federal Reserve Bank said factory activity in the U.S. mid-Atlantic region unexpectedly expanded in October to its highest level in six months.

(Additional reporting by Lisa Twaronite in Tokyo and Umesh Desai in Hong Kong; Editing by Ramya Venugopal)

The U.S. exchange operator disclosed in February that it was investigating a breach into its network.

Nasdaq OMX Group identified that its systems were hacked last year, and removed malicious software from its servers in October. That sparked an investigation involving the FBI and National Security Agency that is ongoing.

Trading platforms were not compromised, the exchange said when it disclosed the attack in February, although an Internet-based software program was attacked.

Nasdaq sells that program, called Directors Desk, to listed and private companies, which use it to let board members get access to and share documents and communicate with executives, among other things.

While the Directors Desk was infected, hackers were able to access confidential documents and communications of the directors who got access to the program, said Tom Kellermann, chief technology officer with security technology firm AirPatrol Corp.

Another person familiar with the investigation confirmed Kellermann's account of the matter, but declined to be identified by name because he is not authorized to discuss the matter.

(Reporting by Jim Finkle. Additional reporting by Jonathan Spicer in New York. Editing by Robert MacMillan)

An admission by French President Nicolas Sarkozy on Wednesday that Berlin and Paris were divided over how to make the euro zone bailout fund more effective had already dented hopes that Sunday's EU summit would bring substantial progress.

News the IMF rated EU projections for Greece's debt too optimist and wanted to delay approval of the next aid tranche further complicated the picture. The fund wants to wait until after this weekend's summit to see if discussions produce a clearer picture, EU officials said.

Without an eight billion euros loan payment from the EU and IMF next month Greece faces default, possibly dragging the larger economies of Spain and Italy into the mire and sending shockwaves through the banking system.

Seeking a comprehensive plan, euro zone leaders are racing to agree new steps to reduce Greece's debt, strengthen the capital of banks with exposure to troubled euro zone sovereigns and leverage the euro zone's rescue fund to stem contagion to bigger economies.

But progress appears to be glacial.

Sarkozy flew to Frankfurt on Wednesday evening for emergency talks with German Chancellor Angela Merkel, the head of the IMF and other key euro zone officials. French media reported he missed the birth of his daughter in the process.

France has argued the most effective way of leveraging the European Financial Stability Facility (EFSF) is to turn it into a bank which could then access funding from the ECB, but both the central bank and the German government oppose this.

Failure to reach a deal at Sunday's summit of European leaders would further undermine financial markets' confidence in the currency bloc and its ability to get on top of a two-year-long debt crisis, which threatens the long-term viability of the single currency.

Markets caught up with the downbeat tone from policymakers. The euro fell and European shares were down one percent having risen this week on hopes of comprehensive action from euro zone leaders.

Since France's finance minister pledged a decisive outcome to the October 23 summit last Saturday, expectations have been downplayed with Germany and others saying it will only be another step along the road to solving the debt crisis.

"I don't believe that such solutions could be made on Sunday that would ... fix everything. But I'm certain that there will be decisions that point to the right direction," Finnish Prime Minister Jyrki Katainen said in comments broadcast late on Wednesday.

Canada's Finance Minister Jim Flaherty said the "two-steps-forward one-step-back" approach was disconcerting.

FORCED BANK LOSSES?

Adding to the uncertainty, EU officials said there was growing acceptance among key euro zone member states that further private sector involvement in reducing Greece's debt burden may have to be forced, not voluntary, something that has been ruled out up to now.

"Some countries are working under very aggressive scenarios," one EU official said. "Let's be serious, everybody knows that a 50 percent haircut, as Germany is asking for, is not a voluntary move."

In July, private sector investors agreed to contribute 50 billion euros to reducing Greece's debt pile via a debt buyback and swap agreement, which equated to a 21 percent writedown. That is now seen as insufficient to make Athens' debts sustainable.

Greece remains mired in recession and its overall debt is forecast to climb to 357 billion euros ($492 billion) this year, or 162 percent of annual economic output -- which few economists believe can be paid back.

The Financial Times reported that plans to strengthen the banking system, another key plank of the discussions, would fall short of market expectations.

Latest official estimates put the banks capital shortfall at less than 100 billion euros, the FT said, compared with a recent IMF report putting the funding hole at 200 billion and analysts' estimates of 275 billion or more.

With a senior Germany government source saying Berlin remained resolutely opposed to the ECB backstopping the rescue fund, euro zone officials have told Reuters that an alternative model, whereby the EFSF could underwrite a portion of newly issued euro zone debt, is also on the table.

By guaranteeing the first 20-30 percent of any losses, the 440 billion euros EFSF could be stretched three to five times further.

However, analysts are unconvinced that a leverage plan involving a guarantee on first losses would succeed, warning that it could create a two-tier structure in some bond markets and would be meaningless without an explicit commitment from the ECB to go on buying at-risk debt, something it has been reluctant to do.

While Europe's leaders rush to stop a larger writedown of Greek debt infecting others in the euro zone, ordinary Greeks are raging at the prospects of several more years of pain as the price of help from international lenders.

Greek protesters marched on parliament on Thursday, raising the prospect of more violence in strikes against austerity measures parliament is poised to approve to try to stave off bankruptcy.

Running battles between black-clad demonstrators and riot police on Wednesday left streets in central Athens covered with smoldering rubbish and lumps of masonry hacked off buildings in a repeat of clashes seen in anti-austerity protests in June. ($1 = 0.725 Euros)

(Writing by Mike Peacock; editing by Janet McBride)

Yahoo advisers Goldman Sachs and Allen & Co informed interested parties this week of a "no cross talk" provision, part of a non-disclosure agreement that must be signed to gain access to Yahoo's sensitive financial data, the sources said.

The provision has irked several potential buyers, including private equity firms that had planned to jointly bid for Yahoo.

They have refused to sign the nondisclosure agreement, and one source went so far as to call the provision a deal-breaker.

With a market value of about $20 billion, Yahoo is likely too big for any one party to swallow, with the exception of possibly Microsoft Corp.

But even Microsoft is considering a team bid, the Wall Street Journal said. It reported in its Deal Journal that Microsoft was working with Silver Lake Partners and the Canada Pension Plan Investment board on a proposal.

"Under the proposal being discussed, Microsoft would put up several billion dollars of funding, with additional financing being arranged by banks," the newspaper said, quoting unnamed sources.

Silver Lake and the Canadian fund would kick in the rest, though this would be less than Microsoft's contribution, the report said.

Bill Cox, a Microsoft spokesman visiting Hong Kong, declined to comment on the report.

Reuters has previously reported Microsoft and Silver Lake Partners, a buy-out firm, were among a host of interested bidders.

Jack Ma, the founder and CEO of Chinese e-commerce giant Alibaba Group, also reiterated his interest in buying Yahoo on Thursday.

"If the board is willing to sell, I'm interested. They've just got to let us know," Ma said at the AllThingsD event in Hong Kong.

If Yahoo insists on the "no cross talk" provision, it could heighten pressure on Yahoo's co-founder and former CEO Jerry Yang, who has been criticized for not acting in the best interest of shareholders.

The prevailing perception is that Yang derailed the Microsoft talks in 2008.

Yang said the company has not ruled out any possibilities.

"There are plenty of options for it to work and there are plenty of options for shareholders to realize that," Yang told the AllThingsD event when asked about the possibility of selling Yahoo.

Yang and Tim Morse, who was appointed interim chief executive after Carol Bartz was fired in September, have been driving the strategic review process, sources said.

Yang is interested in a deal with private equity firms to take Yahoo private in part because he sees that as the best option for preserving his connection to the company, Reuters has reported.

FOR COMPETING BIDS

The "no cross talk" rule is aimed partly at keeping that competitive tension in the bidding process.

"The board is taking action that is not conducive to the process," said the source, who spoke on condition of anonymity.

Implementing a "no cross talk" policy gives Yahoo more control over its strategic review. The company is not opposed to a joint bid, but it wants to encourage competition and avoid all the bidders forming one giant consortium, according to another person familiar with the situation.

"If they can control it, they can pair people up in a way so that you have a couple of consortiums," said the source.

"Whereas if they let everyone talk to everyone, it could very well be -- given the size of the check -- that you end up having only one buyer to bid on and then you have no tension in the auction."

A Yahoo spokesman declined to comment.

Over the last few weeks, private equity firms including Bain Capital, Silver Lake, Providence Equity Partners and Hellman & Friedman LLC have stepped up efforts to partner among themselves or with potential strategic buyers, such as Chinese e-commerce giant Alibaba or Microsoft.

AOL Inc Chief Executive Tim Armstrong is also actively trying to sell investors on a deal with Yahoo, though that is viewed to be a very long shot.

Private equity firm Blackstone Group has also expressed interest in the Internet giant, said one of the sources. A Blackstone spokesman was unavailable for comment.

The Wall Street Journal also reported that some private equity firms were valuing Yahoo between $16 and $18 per share. By comparison, Microsoft offered as much as $33 per share, or $47.5 billion, for Yahoo three years ago.

Yahoo shares rose 3.04 percent to close at $15.94 on the Nasdaq on Wednesday.

Given the poor lending environment and lukewarm interest from strategic buyers, a club deal involving at least two or more private equity firms is seen as necessary to getting a deal done, sources said.

But it would be hard for interested parties to put together an offer without access to detailed information on such things as the contractual agreements between Yahoo and its investment partners Alibaba and Softbank, or details of the search pact with Microsoft.

"The good news is there is a decent amount of information out there on Yahoo, but it is not at the level to do real due diligence," said the second source.

"You need to get under the covers there to peel back and see if the metrics are working in different business lines."

Financial information on Yahoo is expected to be circulated to interested parties this week.

(Additional reporting by Lee Chyen Yee in HONG KONG; Writing by Peter Lauria; Editing by Tiffany Wu, Bernard Orr, Mark Bendeich and Vinu Pilakkott)

The euro dipped as European policymakers struggled to reach consensus on the region's sovereign debt crisis, and concerns about the global economy hit industrial metals such as copper and commodity-linked currencies such as the Australian dollar.

The European stock index futures was down 1.3 percent, while futures for Germany's DAX and France's CAC-40 were also down more than 1 percent and financial spreadbetters called the FTSE 100 .FTSE to open as much as 1.2 percent lower. .EU .L

On Thursday, risk aversion prompted investors to trim cross-yen pairs, pushing the Aussie down 0.7 percent against the yen.

Gold resumed its inverse correlation with the greenback and fell more than 1 percent, weighed down by a firmer dollar, as measured by an index against six major currencies.

But investors looking for alternative assets found a place in the Asian bond market, where Korean National Oil Corp's (KNOC) 5-year dollar bond drew strong interest, helping soothe sentiment and limiting the spread on a key Asia credit default swap index.

KNOC sold its bonds at a tighter spread than the initial guidance and a strong appetite in the secondary market narrowed the yield further by about 10 basis points on Thursday, with the issue trading at around 295 basis points over U.S. Treasuries.

The $1 billion bond was eight times subscribed.

Investors from Asia accounted for 44 percent, U.S. 40 percent and Europe 16 percent.

"The investors were eager to play with broader sentiment turning ... even though the EU isn't completely out of the woods," said a banker close to the deal.

Korean issuers have been among the most active issuers in Asia, and their activity may pick up as they will likely face calmer conditions in the dollar bond market following the swap agreement between Seoul and Tokyo on Wednesday.

"It is positive for Korean borrowers as it will likely reduce external risk for South Korea," said Young Sun Kwon, Hong Kong-based economist with Nomura International.

The improved environment helped contain spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, which widened by a couple of basis on Thursday.

But the spread of bonds issued by the European financial stability facility and German government bonds widened by around 20 basis points this week, underscoring a lack of investor confidence in the progress to contain the debt crisis.

"Seeing how European policymakers are struggling to come to an agreement, investors are doubtful if they can really move forward with the rescue fund," said Akane Enatsu, credit analyst at Barclays Capital in Japan.

ASIA SHARES FALL

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 2.7 percent, with the materials sector .MIAPJMT00PUS and the energy sector .MIAPJEN00PUS leading the decline, each falling over 4 percent.

Australian shares .AXJO slid 1.6 percent and ended at two-week lows on Thursday as miners sank after copper and gold prices fell, while Japan's Nikkei stock average .N225 declined 1.0 0.9 percent. .T

U.S. stocks ended lower on Wednesday as sentiment was also undermined by the Federal Reserve's Beige Book report, which suggested the outlook for the U.S. economy grew dimmer in September.

Shanghai copper fell by its limit of 6 percent on Thursday, with the most-active January copper contract on the Shanghai Futures Exchange tumbling as low as 50,950 yuan ($7,989.024) per tonne in early trading.

"This is mostly a reaction to the euro zone crisis, and a major correction after the recent rebound has ended," said Zhao Kai, an analyst at Jinrui Futures.

Spot gold dropped 1.7 percent to just above $1,610.00 an ounce on Thursday, on course for a fourth consecutive losing session, dragging both platinum and silver down by about 2 percent.

Oil trimmed earlier gains and deepened losses as other commodities fell. Brent crude futures dropped 0.3 percent to $108.05 a barrel, while U.S. crude futures fell 0.7 percent higher at $85.54 a barrel.

SAMURAI EYED

As safety assets are sought around the world, Japanese government debt market may offer a window of opportunity for investors while the samurai bond market may provide a forum for issuers looking for funding channels.

Non-Japanese issuers have been showing interest in tapping the s samurai market, as yields on safe-haven JGBs have been pinned to historically low levels and investors are keen to receive premiums, provided the issuers meet their criteria.

"Japanese investors are facing an increasing difficulty managing their portfolio and demand is there for bonds offering good spreads," Barclays' Enatsu said.

"But they are also conservative, and are looking not only at the credit rating of the issuer but also at whether an issuer has an event risk that's foreseeable," she said.

Samurai bonds are yen-denominated bonds issued in Japan by a foreign borrower.

Foreign investors were net buyers of JGBs for a third straight month in September, data from the Japan Securities Dealers' Association showed on Thursday as they stepped up their buying to 1.05 trillion yen ($13.6 billion) from 818.5 billion yen for August in their biggest purchase since May.

EURO UNDER PRESSURE

The euro fell 0.3 percent to $1.3707, having retreated from the previous day's intraday high of $1.3870, as European policymakers struggled to reach consensus on measures to contain the crisis.

French President Nicolas Sarkozy heightened concerns about progress by saying plans to tackle the euro zone debt crisis have stalled, with Paris and Berlin were at odds over how to increase the firepower of the region's bailout fund.

Investors are awaiting Sunday's EU Summit and details about plans to contain the festering crisis by beefing up the rescue fund.

A report in the Financial Times on Thursday said the plan to strengthen Europe's banking system is set to fall short of market expectations.

(Additional reporting by Umesh Desai in Hong Kong, Akiko Takeda in Tokyo and Carrie Ho in Shanghai; Editing by Richard Borsuk)