GLOBAL MARKETS-Euro, stocks fall on worries over Greek debt deal

* Greek debt worries hit risk appetite

* European shares hit by tech sector fall

* Fed policy statement eyed

By Richard Hubbard

LONDON, Jan 25 (Reuters) - Concern over how Greece's debt talks will develop trumped any appetite for riskier assets on Wednesday, despite good economic data from Germany and a widely held view that the U.S. Federal Reserve is set to signal an extended period of ultra-low rates.

The euro and European stocks fell, while U.S. stock index futures pointed to a mixed open on Wall Street, even after technology giant Apple Inc's strong quarterly profit figures.

Growing worries the European Central Bank may have to write down its holdings of Greek debt as part of a deal to restructure the country's mountain of debt and unlock the funds needed to avoid a messy default hurt the euro and lifted safe-haven German government bond prices while also pushing up Italian yields.

"Uncertainty over the Greek debt talks and disappointment that there has still been no deal is spoiling the party for the euro," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

International Monetary Fund Managing Director Christine Lagarde added to Greek debt concerns by saying public sector creditors may need to participate in the restructuring if bond losses negotiated with the private sector are not enough to make Athens' debt sustainable.

The fear is that any increase in the costs borne by the ECB to reach a deal with Greece will cut the funds available to help other indebted euro zone nations.

The Greek government said it hopes to complete talks on a deal with its private creditors as early as this week, despite euro finance ministers' rejection of an initial plan.

The debt concerns quickly extinguished modest demand for the euro that followed the release of a widely watched German business sentiment index that beat expectations and rose for the third month in a row in January, suggesting Europe's largest economy may avoid a recession.

"The widely spread fear that the euro zone's biggest economy could now also be caught by the crisis virus has been soothed," said Carsten Brzeski, an economist at ING in Brussels.

The euro fell back under $1.30 against the U.S. dollar to be down around 0.5 percent at about $1.2945 and further away from Tuesday's three-week high of $1.3063.

Recession fears elsewhere in the euro zone region gained some traction when Britain reported its economy had contracted more than expected in the final three months of 2011, as factory and utilities output slumped. Four out of the UK's top five export markets are in the euro zone.

TELECOMS HIT SHARES

Share market reaction to the economic data was muted with the pan-European FTSEurofirst 300 index falling 0.8 percent to 1,036.33, weighed down by the technology sector despite Apple's strong earnings late on Tuesday.

The tech sector weakness was due to a 14 percent fall in the share price of world No.1 mobile gear maker Ericsson after it reported that profits had halved in the fourth quarter as the global economic slowdown hit demand for new equipment.

The STOXX Europe Technology index was down 2.6 percent.

German manufacturing conglomerate Siemens also saw its shares fall for a second successive day, down 4.9 percent, after reporting weak results as the euro zone crisis takes its toll on consumer demand.

FED RATE OUTLOOK AWAITED

The dollar index, which measures the U.S. currency against six other key currencies, hovered near a three-week low just below 80 ahead of a statement expected from the Federal Reserve's key policy making committee later on Wednesday.

The Fed is expected to leave its key interest rates unchanged but is due to release a new long-term interest-rate projection that could signal an extended period of ultra-low interest rates at the end of its first meeting of 2012 later on Wednesday.

Recent gains in global stocks and the euro, despite inconclusive talks over a bailout for Greece, combined with the outlook for a prolonged period of low U.S. interest rates, may strengthen downward pressure on the dollar.

"The risk is the Fed could be more dovish than what the market is expecting, in which case you might see the dollar pull back," Geoff Kendrick, currency strategist at Nomura said.

In Asia the yen fell but the Nikkei index gained after Japan reported its first trade deficit in over 30 years, which prompted investors to pare back on long positions in the Japanese currency.

The rally in Japan and in Australia helped offset weakness in Europe to leave the MSCI world equity index little changed at around 314.50.