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News out of Europe has kept investors on pins and needles for months. Investors are worried a possible default by Greece could trigger another financial crisis that could spread beyond Europe.

The European Central Bank provided a happy surprise early to investors with an interest rate cut, a sign of a more aggressive approach to confront weak growth in the region.

Greek Prime Minister George Papandreou backed away from his referendum proposal that could have derailed last week's long-awaited agreement to cut Greek debt and shore up European banks.

"There's just this extraordinary focus on Greece, the fast money in the market is interpreting the news out of Europe ... and they're saying this is good, this is bad," said Eric Kuby, chief investment officer at North Star Investment Management Corp. in Chicago.

"A month or two ago people thought there was going to be a bigger crisis, more contagion. It's not happened, so people are trying to get more invested in equities, putting the risk trade back on."

Stocks associated with growth led, with energy the best-performing sector on Thursday. Equity performance has been highly correlated with the euro, which gathered steam throughout the day on supportive headlines from Europe.

The S&P energy index .GSPE rose 2.5 percent, while the technology index .GSPT gained 2.4 percent.

The Dow Jones industrial average .DJI was up 208.43 points, or 1.76 percent, at 12,044.47. The Standard & Poor's 500 Index .SPX was up 23.25 points, or 1.88 percent, at 1,261.15. The Nasdaq Composite Index .IXIC was up 57.99 points, or 2.20 percent, at 2,697.97.

Shares of mobile phone chip maker Qualcomm (QCOM.O), up 7.5 percent to $56.11, helped support the Nasdaq a day after the company forecast sales above forecasts.

The focus on Friday should shift more to the United States when the Labor Department releases October's non-farm jobs report. Economists polled by Reuters forecast the economy added 95,000 payroll jobs last month.

Data on Thursday showed fewer Americans filed new claims for jobless benefits last week, a sign the U.S. economy's growth is steady.

"What you are seeing is reasonably good economic numbers from the U.S., so you're not seeing anything that's in a negative way changing the focus," Kuby said.

Solid U.S. earnings, too, have provided a lot of underlying support for the market in recent weeks, he said.

After the close, shares of Starbucks (SBUX.O) rose 2.4 percent to $42.40 as it reported results.

About 8.38 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, in line with last year's daily average of 8.47 billion.

Advancing stocks beat declining ones on the NYSE by about 4 to 1 and on the Nasdaq by about 3 to 1.

(Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

The global leader in "daily deals" is now valued at almost $13 billion after saying it increased the offering by 5 million shares to 35 million in total and pricing them at $20 each, above an initial range of $16 to $18.

The debut of the three-year-old company, which sells Internet coupons for everything from spa treatments to nose jobs, is one of this year's most closely watched. Its tiny float represents just above 5 percent of the company and helped drive up demand and price.

That constraint -- one of the smallest floats of the past decade -- should support Groupon's share price when it begins trading on the Nasdaq on Friday under the ticker GRPN, analysts say.

But in the longer run, they cited concerns about competition from the deep-pocketed likes of Google and Amazon.com Inc; the need to spend continuously to drive user growth; and questions about accounting after the company altered its IPO filings twice to change the way it accounted for revenue.

"Groupon is expensive. The $12.8 billion valuation is only achievable because of the low float," said Rob Romero, head of technology-focused hedge fund firm Connective Capital Management.

"Today's reaction to LinkedIn floating additional share supply is an indication of how tight supply-demand of shares can distort valuation for a new IPO."

LinkedIn, which remains well above its $45 IPO price, plummeted 9 percent after-hours after unveiling a proposal to sell up to $500 million in stock. It had floated 8.3 percent of its shares during the IPO.

Pandora Media, a music streaming service and another recent dotcom debutante, sold 9.2 percent of the company.

At $12.8 billion, Groupon commands a price tag more than twice what Google offered to buy the company last year.

WIDESPREAD CRITICISM

Beyond Friday, Groupon shares may prove volatile on concern about the company's ability to generate long-term profit and revenue growth, plus the likelihood that existing investors will sell some of their holdings at some point.

Quirky music major and CEO Andrew Mason and his executive team spent almost two weeks on the road pitching to investors and addressing widespread criticism about Groupon's replicable business model, slowing growth and accounting concerns.

"The post-IPO investor will be taking a risk on this deal," said Josef Schuster, founder of IPO research and investment house IPOX Schuster. "It's maybe a good trade for a day trader, in and out in a single day, but I don't want to be in it for the long run."

To pull the deal off, the company cut its valuation by about half. Existing shareholders aren't selling. And it skipped meetings with potential investors in Europe and Asia.

If underwriters, led by Morgan Stanley, Goldman Sachs and Credit Suisse, exercise their right to buy just over 5 million more Groupon shares in the IPO, known as the greenshoe, Groupon will raise more than $800 million, before fees.

Wall Street will scrutinize Groupon's Friday showing for clues as to how other highly anticipated dotcom IPOs -- from the likes of Facebook or Zynga -- may fare.

LinkedIn surged on the first day of trading in May and remains far above its $45 IPO price. Pandora's shares surged initially, then slumped. Its shares traded below the $16 IPO price on Thursday at just over $15.

Groupon "is a company with permission to market to 150 million consumers daily. No other company in the world has ever had that type of reach," said Boyan Josic, chief executive atDailyDealMedia, which tracks the industry.

"Investors who truly understand this business model and the position that Groupon has in this market are buying."

(Editing by Edwin Chan, Tiffany Wu and Muralikumar Anantharaman)

The Labor Department is due to release at 8:30 a.m. EDT first-time claims for jobless benefits for the week ended October 29. Economists forecast a total of 400,000 new filings compared with 402,000 in the prior week.

NYSE Euronext, which is still in the throes of seeking regulatory support for its planned $9 billion merger with Deutsche Boerse, cited strong trading and technology sales as being behind a 54 percent rise in its third-quarter profit to $186 million.

The Labor Department also releases at 8:30 a.m. EDT preliminary Q3 Productivity and Unit Labor Costs data. Economists forecast productivity to rise 2.8 percent versus a 0.7 percent drop in the revised Q2 report. Unit Labor costs are expected to fall 0.8 percent compared with a 3.3 percent increase in the previous report.

U.S. online retailer Amazon.com said Kindle owners with an Amazon Prime membership will now get access to the company's new digital book library service.

Eastman Kodak is expected to post a quarterly loss of 44 cents per share, up from a loss of 2 cents per share in the same period last year. Other companies announcing results include Starbucks, American International Group and First Solar.

The Institute for Supply Management releases at 1400 GMT its October non-manufacturing index. Economists forecast a reading of 53.5 versus 53.0 in September.

The threat of a Greek exit from the euro zone hung over a meeting of G20 leaders on Thursday after France and Germany said Athens must decide urgently whether it wants to stay in the 12-year-old currency bloc.

Mario Draghi is expected to play safe at his first policy meeting as European Central Bank president on Thursday, seeking to project calm rather than being panicked into ramping up the bank's response to the escalating euro zone crisis.

The Commerce Dept releases at 10 a.m. EDT September factory orders. Economists in a Reuters survey expect a 0.1 percent fall compared with a 0.2 percent drop in August.

ICSC releases chain store sales for versus a year ago. In September, sales were up 5.5 percent versus a year earlier.

News Corp posted a better than expected quarterly profit because of cable television and Fox broadcast network fees, even as the family-controlled company grapples with questions of who will lead it once Rupert Murdoch steps aside. Its shares were up 2.3 percent after the bell when results were announced.

Shares in Zillow Inc and Qualcomm Inc were up 11 percent and 6.2 percent respectively in late trade on Wednesday following their results, while Whole Foods Market Inc and Dendreon Corp fell 7.3 percent and 11.5 percent respectively.

Groupon Inc is poised to price its initial public offering at $1 to $2 above its current range, responding to stronger than anticipated demand for the biggest U.S. IPO in months, three buyside sources said on Wednesday.

European share prices fell sharply in early trade on Thursday after France and Germany told Athens it would not receive its next aid tranche until a national referendum on an aid package had passed, sparking fears Greece could default and the crisis could spread to larger economies.

Share prices recovered later in the session with traders citing talk of the Greek government collapsing, thereby avoiding the referendum.

U.S. stocks rebounded from two days of sharp losses on Wednesday after the Federal Reserve said it is prepared to do more for the economy if conditions warrant, helping to stanch the panicky reaction to Europe's debt crisis.

The Dow Jones industrial average rose 178.08 points, or 1.53 percent, at 11,836.04. The Standard & Poor's 500 Index gained 19.62 points, or 1.61 percent, at 1,237.90. The Nasdaq Composite Index added 33.02 points, or 1.27 percent, at 2,639.98.

(Reporting by Atul Prakash; Editing by Greg Mahlich)

U.S. stock futures also fell, retreating from a Wall Street rebound on Wednesday, as leaders of the world's biggest economies began arriving in France for a G20 summit set to be dominated by the threat of a Greek exit from the euro zone.

Asian stocks dropped 1.8 percent and European shares were seen making similar losses at the start of trading, while oil, copper and the commodity-linked Aussie fell around 1 percent and credit markets weakened.

The leaders of France and Germany, angered at Greece's shock move to call a referendum on its latest bailout plan negotiated last week, told Prime Minister George Papandreou on Wednesday that Athens would not receive another cent in EU aid until it decides whether it wants to stay in the euro zone.

"It's clearly a worse situation as it is putting other euro zone members in a corner," said Jeremy Friesen, a commodity strategist at Societe Generale in Hong Kong.

If Greek voters reject the 130 billion euro bailout package, which is conditional on harsh austerity measures, it could lead to a disorderly default, with the fallout affecting European banks and rippling across the global financial system.

Financial bookmakers in London called the FTSE 100 index to open down 1 percent, while Germany's DAX was seen down 1.7 percent and France's CAC-40 down 1.4 percent.

MSCI's broadest index of Asia Pacific shares outside Japan fell 1.7 percent, while S&P 500 futures traded in Asia lost 1.2 percent. Wall Street shares had gained more than 1.5 percent on Wednesday.

Tokyo's financial markets were closed for a public holiday.

ECB IN FOCUS

As well as watching events at the G20 summit in Cannes, investors were also focused on Frankfurt, where the European Central Bank was holding its first policy meeting under new President Mario Draghi.

Many analysts see the ECB as the only institution with the firepower to calm tensions, and the key question after the meeting -- at which no change in interest rates is expected -- will be whether it will increase its purchases of bonds issued by debt-ridden euro zone states.

On Wednesday, the U.S. Federal Reserve offered no new stimulus, but said it was mulling the possibility of buying more mortgage debt to spur a struggling recovery.

The euro fell 0.3 percent to around $1.3710 as investors took sanctuary in the dollar, which rose by a similar margin against a basket of six major currencies.

"We're negative on the euro," said Adarsh Sinha, Asia-Pacific G10 FX strategist at Bank of America Merrill Lynch in Hong Kong. "There are very few scenarios in my mind where the euro can rally significantly."

Adding to the gloomy economic outlook were surveys on Wednesday showing that the downturn in euro zone manufacturing in October was even deeper than previously thought.

"Although further developments in the euro debt saga are likely to trigger more market volatility, a possible slowdown in the real economy, as indicated by the recent release of euro area PMIs, will be more of a concern medium-term," Barclays Capital analysts warned.

The pullback from risk also knocked oil lower, with U.S. crude down 1 percent at $91.55 a barrel and Brent crude off 0.6 percent at $108.71.

Copper fell 1.1 percent on the London Metal Exchange to below $8,000 a tonne.

The Australian dollar, seen as a "risk" currency because it is heavily influenced by expected demand for Australia's natural resources, fell 0.9 percent to around $1.0248.

In Asian credit markets there was a widening of spreads on the iTraxx Asia ex-Japan investment grade index, which can be used as a gauge of risk appetite.

Gold, which in recent months has largely flipped from a negative to a positive correlation with riskier commodities as safe-haven seekers favor the dollar, fell 0.3 percent to around $1,733 an ounce.

(Editing by Richard Borsuk)

The summit on the French Riviera had been meant to focus on reforms of the global monetary system and steps to rein in speculative capital flows, but a shock decision by Greek Prime Minister George Papandreou Monday to call a referendum on a new EU/IMF aid package for his country has upended the talks.

Papandreou was summoned to Cannes on the eve of the summit and given a stark warning by French President Nicolas Sarkozy and German Chancellor Angela Merkel, both clearly angered by his gambit, which has sent global stock markets and the euro currency spiraling lower.

They convinced the Greek prime minister to bring forward the referendum to early December and insisted it be focused on the broad issue of whether Greece wants to stay in the currency bloc, rather than limiting it to a vote on a new 130 billion euro ($179 billion) bailout package, which a strong majority of Greeks oppose.

They also made clear that Athens would not receive an 8 billion euro aid tranche it desperately needs to avoid default until the referendum had passed.

Should it fail, the EU/IMF aid would end, plunging Greece into a disorderly default that would reverberate across the 17-nation euro zone, engulfing big economies like Italy and Spain.

"Our Greek friends must decide whether they want to continue the journey with us," Sarkozy told reporters at a joint news conference with Merkel after the crisis talks.

The German chancellor, describing the discussions with Papandreou as "tough and hard," said the goal of stabilizing the euro was ultimately more important than saving Greece if it did not want to be saved.

A chastened Papandreou flew back to Athens with his finance minister shortly after the talks had ended. Before leaving he said the referendum could take place on December 4 and would be focused on "whether we want to remain in the euro zone."

DAMAGE CONTROL

Thursday morning, the leaders of France, Italy and Spain, the German finance minister and the heads of the International Monetary Fund, European Central Bank and other top EU officials will meet to look at ways of accelerating the implementation of an anti-crisis package agreed on October 27.

That plan, which includes debt relief for Greece, a recapitalization of European banks and a leveraging of the bloc's rescue fund, the European Financial Stability Facility (EFSF), was meant to stem the two-year old crisis before Papandreou's referendum call sent the bloc into damage control mode.

"The referendum adds a further layer of complexity and uncertainty to an already complex crisis," said Domenico Lombardi, a former IMF executive board member who is now a senior fellow at the Brookings Institution in Washington.

"Most importantly, it starts off a political mechanism that could eventually result in Greece leaving the euro."

As the mini euro zone summit is taking place, Merkel will be holding talks with U.S. President Barack Obama, who is due to arrive in Cannes early Thursday. Heading into an election year, Obama is worried the euro zone crisis could blow up and hit the struggling U.S. economy.

Ben Bernanke, the chairman of the U.S. Federal Reserve, announced Wednesday that the central bank was slashing its projections for growth and raising forecasts for unemployment.

The meeting of leaders from the world's 20 major economies will formally begin with a working lunch that had been meant to focus on the world economy, but is now likely to be dominated by Europe's debt woes.

Sarkozy had hoped to use his presidency of the G20 as a springboard for his own re-election campaign in 2012, setting ambitious goals including a rethink of the global monetary system and measures to fight commodity price volatility.

But he has been forced to scale back expectations as crisis-fighting has taken priority over grand visions of world economic reform.

CHINA WANTS DETAILS

Sarkozy met Chinese President Hu Jintao Wednesday as part of a European effort to convince the world's emerging powers to help boost the firepower of the bloc's bailout fund.

But he told the French president that it was up to Europe to solve its debt woes, according to a statement published by China's Ministry of Foreign Affairs.

China's deputy finance minister Zhu Guangyao said after the talks that Beijing needed more details from Europe before considering any bigger investment in the EFSF.

Doubts about Europe's ability to contain the debt crisis has put Italy firmly in the firing line.

The risk premium on Italian bonds over safe-haven German Bunds has hit euro-lifetime highs this week, despite European Central Bank buying of its bonds.

Italian Prime Minister Silvio Berlusconi has scrambled to come up with measures to placate markets, holding an emergency cabinet meeting to accelerate budget reforms amid mounting calls for his resignation.

The summit in Cannes is being held against a backdrop of rising public anger over economic gloom and a perception that taxpayers are being asked to pay for the sins of reckless banks. Authorities of expecting hundreds of protesters, but the leaders, who are meeting at the site where the annual Cannes film festival is held, are safely cordoned off and French policemen were everywhere on the streets.

(Writing by Noah Barkin; Editing by Alison Williams)