European earnings were mixed Thursday, with forecast-beating results out from London-based SABMiller and UK telecom BT and a drop in profit for financial KBC.

U.S. prosecutors are expected to approach UBS with a subpoena for the names of rich American clients who may have used the Swiss bank's services to skirt income taxes, the Wall Street Journal said on Thursday, citing lawyers and others involved in the case.

European shares traded flat by midday on Thursday, with BT Group up more than 4 percent on the back of robust results while Barclays fell after refusing to rule out a rights issue.

British bank Barclays said profits fell by an undisclosed amount in the first quarter and refused to rule out a rights issue after a 1 billion pound ($1.95 billion) writedown on assets tarnished by the credit crunch.

The euro strengthened on Thursday after Germany reported its strongest quarterly growth in 12 years but gains were muted as investors focused on likely slower growth ahead.

The U.S. economy is in a recession and stimulus from a government tax rebate later this quarter will only temporarily stem a fall in consumer spending, a Merrill Lynch economist said on Wednesday.

Freddie Mac, the second-biggest provider of funding for U.S. residential mortgages, on Wednesday said its first-quarter loss widened slightly as its credit losses deepened.

Global banks have disclosed 80 percent of forecast losses on subprime mortgage-related assets, meaning further ratings actions due to losses on these instruments are likely to be "minimal," Fitch Ratings said on Wednesday.

Banks dominated European earnings Wednesday, as France's BNP Paribas and the Netherlands' ING Group reported falls in first-quarter profit due to the ongoing market turmoil.

European shares ended higher on Wednesday as tame U.S. inflation data eased worries that the U.S. Federal Reserve might have to raise interest rates to keep inflation at bay, while mining stocks rose on fresh merger talk.

The dollar rebounded against the euro Wednesday as U.S. stocks extended gains and shrugged off a report showing tame reading on U.S. consumer prices in April.

Oppenheimer cut its earnings estimates on some U.S. brokers based on its outlook on the capital markets and sizable estimated revenue reversals due to an accounting rule that lets companies elect to use fair value for certain assets and liabilities.

Bank of America says it is seeing rising credit costs, as it continues to wade through a challenging economic cycle.

The judge presiding over Russia's $22.5 billion lawsuit against the Bank of New York Mellon insisted on Tuesday the case move toward a quick conclusion after more than a year of procedural delays.

France's biggest retail bank, Credit Agricole, announced a 5.9 billion euros ($9.1 billion) rights issue to shore up its capital after further writedowns at its Calyon investment bank, sending its shares down sharply.