The euro zone's struggle to prevent its own break up continues to dominate markets and play on economic confidence.

European shares .FTSE, which have suffered their worst run in over a month in the last few days as euro zone uncertainty has returned, were flat but MSCI's main global index .MIWD00000PUS was down around a third of a percent on the day.

"We are in a vacuum policy wise ahead of the Jackson Hole meeting and the (European Central Bank) meeting on September 6 so we are in a wait and see mode," said Saxo Bank chief economist Steen Jakobsen.

Federal Reserve Chairman Ben Bernanke and other central bank leaders meet in Jackson Hole, Wyoming, next week for an annual get-together that often hints at what monetary policy is to come.

"We are waiting to see whether we get QE3 (another round of asset buying from the Fed) and to see how the ECB is going play the promise that it will help the peripherals, so right now the market is just concentrating on technicals."

Key global stock markets have risen 15-20 percent since June as hopes of a resolution to the euro zone crisis have sustained investor optimism despite a deterioration in company earnings outlooks.

But the rises appear to have come to a halt over the last week. The S&P 500 has failed to break through 1425-30 points, while Europe's top shares have been unable to climb above 1115 points.

WILD CARD

The euro eased back from its recent seven-week highs versus the dollar to stand at $1.2543.

Pushing it down were fading hopes of a rapid new euro zone drive to end its crisis as politicians signaled new plans could take another month to put together. The dollar inched up 0.2 percent to 78.60 yen.

"The data calendar is fairly empty so we suspect that trading will be technical in nature today," said KBC economist Piet Lammens, pointing to a meeting in Berlin between German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras the main point of interest for markets.

"Merkel and Samaras is of course always a wild card but we have had so many indications that the Greek issue will be put back to the end of September, so we don't expect any breaking news coming from that," Lammens said.

Triple A-rated German government bonds, traditionally favored by risk-adverse investors, have rebounded sharply in recent days, tracking the rise in U.S. Treasuries and helped by a return of uncertainty among investors about the euro zone's progress out of its debt crisis.

Bund futures were up 25 ticks at 143.75 in early trading while Spanish Italian and Portuguese bonds saw falls ranging between 0.1 and 0.4 percent.

MESS

Oil prices, which have been trading in a tight range this week, slipped below $115 per barrel. "It's no secret that the global economy is in bad shape," said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.

"Europe's a mess, the U.S. is struggling and China, which was seen as a growth engine, is also sputtering -- all of which points to weak demand for crude."

Investors were also watching Spain again on Friday, after three euro zone sources told Reuters that Madrid is negotiating with European partners over conditions for aid to bring down its borrowing costs, though the country has not made a final decision to request a bailout.

Madrid's IBEX .IBEX had jumped nearly 30 percent since comments by European Central Bank head Mario Draghi in late July sparked expectations of fresh measures to help lower the borrowing costs of Spain and Italy. But it has lost 4.7 percent since a peak hit on Monday, although charts show the index has managed to keep its four-week upward channel intact.

"Pullback would be welcomed by many money managers who failed to take part in the recent move and at some stage will need to tell clients of the underperformance," IG Markets strategist Stan Shamu wrote in a note.

(Editing by Jeremy Gaunt.)

• A Permanent Economic Emergency