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The ratings agency left BNP Paribas on review for a ratings downgrade saying the bank's profitability and capital base provides adequate cushion to support its Greek, Portuguese and Irish exposure.

In a sign of the international alarm over the crisis, China and the United States urged Europe's leaders to prevent the euro area debt mess -- now threatening Italy -- from spreading.

President Barack Obama urged "more effective coordinated fiscal policy" by the euro area states. Chinese Premier Wen Jiabao said Beijing was willing to help its biggest trading partner, but added that Europe must stop the crisis from growing.

Investors are increasingly skeptical the debt debacle in the 17-nation currency area can be resolved. Credit markets are factoring in a 90 percent chance Greece will default on its debts and they demanded the highest risk premium on Italian five-year bonds at auction on Tuesday since the country joined the euro in 1999.

"What we have to take note of now is to prevent the sovereign debt crises from spreading and expanding further," Wen said on Wednesday.

Trying to contain the crisis, Italy is expected to approve a 54-billion-euro ($73 billion) austerity package on Wednesday, although news of the measures has so far done little to reverse investor alarm over whether the euro area's third-biggest economy can manage its debts.

Prime Minister Silvio Berlusconi's government has tabled a confidence motion which would force it to resign if it lost. An initial vote is scheduled for around 1200 GMT ahead of final approval of the austerity package around 1800 GMT.

Greek Prime Minister George Papandreou will hold a conference call on Wednesday with French President Nicolas Sarkozy and German Chancellor Angela Merkel. The call is scheduled for 1600 GMT, Papandreou's office said.

A rebound in stock prices and the euro stalled in Asia on Wednesday as investors remained spooked about the crisis. German government bonds opened higher.

In an attempt to restore confidence, both BNP Paribas and Societe Generale have announced plans to sell risk-weighted assets to help ease investor fears about funding challenges.

BNP said on Wednesday it would sell 70 billion euros ($95.7 billion) of assets and reduce U.S. dollar funding needs by $60 billion by the end of 2012.

Moody's cut SocGen's debt and deposit ratings by a notch to Aa3 from Aa2 with a negative outlook on its long-term debt ratings. For Credit Agricole, it downgraded its bank financial strength rating one notch to C from C+, and cut its long-term debt and deposit ratings by one notch to Aa2 from Aa1.

It kept long-term Aa2 rating of BNP Paribas on review for possible downgrade.

Bank of France Governor Christian Noyer said the Moody's action was relatively good news.

"It's a very small downgrade and Moody's had a higher rating than the other agencies so it's just put them on the same level or slightly better than the others," Noyer said.

A combination of a banking crisis akin to the global credit crunch, a Greek default and a financial meltdown in Italy could tear the euro zone apart.

"I think there is a possibility, if the wrong steps are taken, that the system goes off the rails," Sergio Marchionne, the CEO of Italian carmaker Fiat, told reporters in Frankfurt when asked if the euro's survival was at risk.

Merkel on Tuesday sought to quash talk of an imminent Greek default or its exit from the euro zone. Confused statements from Germany and France over whether they would issue a joint statement on Greece sent markets gyrating up and then down on Tuesday.

Greece has said it would run out of cash in a few weeks and needs an 8 billion euro tranche in October to pay wages and pensions.

Merkel said in a radio interview that Europe was doing everything in its power to avoid a Greek default and urged politicians in her own coalition to weigh their words carefully to avoid creating turmoil on financial markets.

Her economy minister said earlier this week there should be no taboos in stabilizing the euro, including an orderly bankruptcy of Greece. And lawmakers from her coalition have said in recent days that Greece may have to leave the euro zone -- a move Citigroup's chief economist warned would lead to "financial and economic disaster."

"As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area," Willem Buiter said in a note on Tuesday.

Merkel, in an interview with RBB inforadio, said Europe would use all the tools at its disposal to prevent a Greek default and warned that an exit from the bloc would immediately lead to "domino effects.

CHINA SUPPORT

Wen didn't specify what steps China, with more than $3 trillion in foreign exchange reserves, might take to help Europe.

But a senior Brazilian source told Reuters on Tuesday that the so-called BRICS -- Brazil, Russia, India, China and South Africa -- were in early talks on increasing their holdings of euro-denominated debt to help ease the crisis.

"We've said countless times that China is willing to give a helping hand and we'll continue to invest there," Wen said in a speech at a World Economic Forum event in China.

He suggested though that the EU would have to reciprocate Beijing's help by moving to grant China "market economy" status, which would lower its exposure in trade to anti-dumping cases.

Obama told Spanish journalists in a group interview published on Tuesday that euro zone leaders needed to show markets they were taking responsibility for the debt crisis. Weakness in the global economy would persist so long as it is not resolved, he said.

In a measure of Washington's concern, Treasury Secretary Timothy Geithner will take the unprecedented step of attending a meeting of EU finance ministers in Poland on Friday.

It will be his second trip to Europe in a week after he met his main EU counterparts at a G7 meeting last weekend. Obama said that while Greece is the immediate concern, an even bigger problem is what may happen should markets keep attacking the larger economies of Spain and Italy.

"In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective coordinated fiscal policy," the news agency EFE quoted him as saying.

Geithner is likely to urge euro zone finance ministers on Friday to speed up ratification of changes to their bailout fund, but a U.S. official said he would not push for an increase in the fund's size.

ITALY TOO BIG TO BAIL?

Greece, Ireland and Portugal have all been bailed out by rescue packages, but many see Italy as too big to bail out. Its public debt burden is equal to 120 percent of GDP, second only to Greece. However, sluggish growth means it will struggle to whittle down its 1.9 trillion euros in debt.

"Italy is the key to contain this crisis. It is the last window of opportunity before a serious prospect of a meltdown of the euro," Domenico Lombardi, president of the Oxford Institute for Economic Policy and a senior fellow at Washington's Brookings Institution, said.

A Financial Times report that Rome had asked China to buy significant" quantities of its bonds in recent talks provided little support to markets. Indeed, an Italian ministerial source told Reuters the talks had centered on possible Chinese investments in Italy's industrial sector, not its bonds.

(Additional reporting by Reuters bureaus; Writing by Neil Fullick and Kavita Chandran, Editing by Dean Yates)

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Oil eased after the International Energy Agency revised down its forecast for growth in consumption due to the struggling global economy.

Global markets have been roiled since the end of July by the twin fears of renewed recession in the United States and Europe's protracted debt woes, which have seen bailouts for Greece, Ireland and Portugal and sparked fears of a new banking crisis.

"Developments in Europe are sending mixed signals, and this will likely keep investors at bay," said Y.S. Rhoo, a market analyst at Hyundai Securities.

Japan's Nikkei share average .N225 inched up 0.2 percent, but MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.3 percent, with South Korean shares .KS11 losing more than 1 percent.

The MSCI index is now more than 20 percent below its 2011 high reached in April. A decline of 20 percent or more is the rule-of-thumb definition of a bear market.

U.S. stocks rose on Tuesday, with the S&P 500 .SPX up 0.9 percent, amid hopes that European leaders would take action soon to ease the two-year-old sovereign debt crisis.

Markets had been spooked in recent days by renewed talk among euro zone policymakers of a default by Greece, prompted by the country's failure to meet the fiscal goals set out in its EU/IMF bailout.

Greek, German and French leaders were due to hold a conference call at 1600 GMT on Wednesday.

"The conference call will at least calm nerves ... and may provide 24 hours of reprieve. That's about it, though," said Sean Callow, a senior currency strategist at Westpac.

The euro was steady around $1.3690, having jumped more than a cent in the previous session on news of the conference call.

The single currency tumbled to a seven-month trough of $1.3499 earlier this week.

The dollar index .DXY inched up 0.1 percent against a basket of major currencies.

Gold rose 0.3 percent to around $1,837 an ounce, while U.S. crude oil edged down 0.1 percent to around $90.10 a barrel.

(Reporting by Alex Richardson; Editing by Ed Lane)

ICSC/Goldman Sachs release chain store sales for the week ended September 10 versus the prior week at 1145 GMT (7:45 a.m. ET). In the previous week, sales fell 0.7 percent.

Hewlett-Packard (HPQ.N) has extended the deadline for its $11.2 billion takeover offer for British software company Autonomy (AUTN.L) to October 3 after gaining acceptances from only 41.6 percent of shareholders at the first closing date.

At 1230 GMT (8:30 a.m. ET), the Labor Department releases import-export prices for August. Economists forecast a 0.8 percent drop in import prices and a flat reading in export prices. In the prior month, import prices rose 0.3 percent and export prices dropped 0.4 percent.

U.S. conglomerate General Electric Co (GE.N) hopes to double the company's German business in five years through a combination of organic and inorganic growth, a company executive told the Wall Street Journal in an interview.

Redbook releases its Retail Sales Index of department and chain store sales for September versus August at 1255 GMT. In the prior period, sales rose 0.4 percent.

Blackstone Group's (BX.N) Ben Jenkins, a senior managing director and the firm's former top Asia dealmaker, is leaving the firm and returning to New York after four years in the region, two sources said.

Investor's Business Daily and TechnoMetrica Market Intelligence release the IBD consumer confidence index for September at 1400 GMT. The index read 35.8 in August.

At 1800 GMT, the Treasury Department issues monthly budget for August. Economists forecast a $132.0 billion deficit compared with a budget deficit of $129.4 billion in July.

Best Buy (BBY.N) is scheduled to announce quarterly results.

European shares rose in early trade on reports that Italy has asked China to make "significant" purchases of Italian debt, but fell later on concerns that it was not a long-term solution for the euro zone debt crisis. The FTSEurofirst 300 .FTEU3 index of top European shares was down 1.2 percent.

The euro zone's leaders need to show markets they are taking responsibility for its debt crisis and work out how to tally monetary union with budget policy, Spanish press reported U.S. President Barack Obama as saying.

U.S. Treasury Secretary Timothy Geithner makes a one-day trip to Poland this week for an unprecedented meeting with euro zone finance ministers as growing fears of a potential Greek debt default rip into Europe's banking sector.

German Chancellor Angela Merkel said on Tuesday that Europe was doing everything in its power to prevent Greece from defaulting on its debt and cautioned that an exit from the euro zone would unleash "domino effects" and should be avoided at all costs.

The Dow Jones industrial average .DJI finished up 68.99 points, or 0.63 percent, at 11,061.12. The Standard & Poor's 500 Index .SPX was up 8.04 points, or 0.70 percent, at 1,162.27. The Nasdaq Composite Index .IXIC ended 27.10 points higher, or 1.10 percent, at 2,495.09.

(Reporting by Atul Prakash; Editing by Hans-Juergen Peters)

Asked by RBB inforadio whether a Greek default would doom the euro, Merkel answered: "We are using all the tools we have to prevent this. We need to avoid all disorderly processes with regards to the euro."

Calling Europe's challenge "historic," she added that everything must be done to keep the euro zone intact "because we would see domino effects very quickly."

"In a currency union with 17 members, we can only have a stable euro if we prevent disorderly processes. Therefore it is our top priority to avoid an uncontrolled default, because it would hit not only Greece. The danger would be very high that it would hit many other countries."

Merkel's comments come a day after Economy Minister Philipp Roesler, who leads the junior coalition party the Free Democrats in her government, said that to stabilize the euro there could "no longer be any taboos."

Merkel said in her interview everyone should balance their words carefully to avoid further market volatility. She added that Germany felt "absolutely committed" to the euro, saying the country had benefited hugely from it.

Merkel said Europe would not be able to avoid changes to the Lisbon Treaty in the medium-term, making clear that the bloc's rule book needed to be changed to ensure countries that violated fiscal rules were punished.

"Until now, for example, if countries violate the Stability and Growth Pact they cannot be taken before the European Court of Justice," she said.

Merkel also expressed confidence that the German "stability" stance within the ECB would not change after the departure of executive board member Juergen Stark, who is to be replaced by deputy finance minister Joerg Asmussen, a Social Democrat (SPD) whose views on monetary policy are largely unknown.

She expressed confidence that her coalition parties would get a majority without having to rely on the opposition in a vote in the Bundetag lower house of parliament on September 29 to give the European Financial Stability Fund (EFSF) more powers.

(Writing by Noah Barkin; Reporting by Maria Sheahan and Annika Breidthardt; Editing by Anna Willard)