By Patrick Graham
LONDON (Reuters) - Calm dominated European stock and markets on Friday as investors hoped an emergency meeting of euro zone leaders next week would allow Greece to avoid default later this month.
The subdued reaction of many markets in recent weeks supports those who argue that the exposure of Europe's private sector to Greece is minimal and that a default or even its departure from the euro may have little effect.
As Greeks tried to get their euros somewhere safe, risks were high going into the weekend that the situation is reaching the point of no return. But the official rhetoric is still about the search for a solution.
Greek shares, which have fallen 17 percent this year, slipped only 0.2 percent after the collapse of talks late on Thursday. The euro fell half a percent against the dollar but remained within recent ranges. Major European stock markets rose across the board.
"People have got used to these kind of headlines. A lot of it, however, is posturing and speaking to their own constituencies," said Michael Michaelides, European rates strategist at RBS. "Most people think there will be a deal, but it's definitely not one way."
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Asian stocks also gained earlier, and U.S. markets were set to open higher, reflecting hopes that the Federal Reserve will be cautious about raising U.S. interest rates this year.
If there is contagion from Greece, it should be Italy, Spain and Portugal who are hit first.
Italian government bond futures, the yardstick for bonds issued by the euro zone's southern bloc fell sharply, before recovering. Stock markets in both Madrid and Milan advanced, helping the pan-European FTSEurofirst 300 index to rise 0.7 percent.
Asian shares had risen for a third consecutive day, although optimism was tempered by another 6 percent fall in Shanghai, now down more than 13 percent for the week.
Regulators moved again this week to tighten margin financing in China - a key factor in the market's rally this year - and a round of initial public offerings has also increased share supply.
"First ... room for further monetary easing could be less than anticipated, and inflows of new investors could have already peaked," Bosera Asset Management Co said in a note to clients on the correction.
"Secondly, a highly-leveraged bull (market) is not sustainable," Bosera said, citing moves by the government to reduce margin loans, which the asset manager estimates have reached between 3 trillion and 4 trillion yuan.
In commodities, both U.S. crude futures and Brent fell by around a dollar, Brent trading at $63.19.
(Additional reporting by Samuel Shen, Pete Sweeney in Shanghai and Hideyuki Sano in Tokyo; Editing by Larry King)