World stocks were steady on Friday, off this week's 3-1/2 month low, as robust corporate earnings highlighted the underlying strength of the global economy, calming concerns about a global credit squeeze.
Almost two weeks of a sell-off in equity and credit markets stemmed from concerns that a fallout in the U.S. housing sector will trigger a broad repricing of risks in a market which enjoyed cheap money and high appetite for high-yielding assets.
But a string of forecast-beating results from major companies, including Allianz, Royal Bank of Scotland and British Airways on Friday, has helped soothe such concerns. Investors are keen to see U.S. jobs data due later in the day for more clues on the strength of the economy.
We've had some strong company results and that is helping the market, said Ernst Konrad, head of equities at funds group BayernInvest in Munich with 29 billion euros ($40 billion) in assets under management.
MSCI main world equity index was up 0.1 percent, having hit the 3-1/2 month low earlier this week.
The FTSEurofirst 300 index rose 0.3 percent on the day before erasing gains.
The iTraxx Crossover index, most-widely watched indicator for European credit market sentiment, steadied at 383 basis points. It was the blowout of this index which triggered a repricing in the credit risk and a sell-off in stocks in July.
Global financial markets have endured a rollercoaster ride since late last week as investors assess the damage from the risky U.S. subprime mortgage sector on the otherwise robust world economy.
The fallout in subprimes -- about a fifth of total annual mortgage lending there -- has served as a wake-up call to the wider credit market which has provided cheap money to consumers and corporates in the past several years.
The ensuing repricing of risk and volatility in turn threaten to end the easy financing of corporate takeover deals, a key factor behind a four-year rally in equities.
Banks which lend to corporates or private equity firms are also having difficulty passing on the risk with syndicated loans and are forced to sell to investors at a loss or keep the credit on their books.
Barings Asset Management estimates the amount of incomplete cash-financed leverage and management buyouts sitting on bank balance sheets at around $400 billion.
Investors are eyeing U.S. jobs data due later in the day to gauge the strength of the economy. The September Bund future was up two ticks in subdued trading before the data.
We've come through (overnight) without any hedge funds going bust so there's a little bit of a calming influence at the moment being provided by the subprime market not blowing out, said David Keeble, head of fixed income strategy at Calyon.
The dollar was steady at $1.3712 per euro.
London Brent crude was slightly higher on the day, while U.S. crude held near this week's record high.
Gold was slightly higher at $665.90 an ounce.
-- Additional reporting by Peter Starck