World stocks rose and the euro weakened slightly against the dollar on the opening day of the second quarter, ahead of U.S. jobs data expected to give further impetus to those investors betting on improving world growth.

That positivity had earlier pushed Asia shares, ex-Japan, to near-three-year highs, although concerns over euro zone debt, Japan's nuclear crisis and conflicts in the Middle East all have the potential to nix the rally.

After eaking out a small gain in the first quarter, European equities <.FTEU3> made a healthy stab at retracing the previous day's 0.9 percent slide and by 0804 GMT were up 0.8 percent.

Elsewhere, the MSCI world equity index <.MIWD00000PUS> and the Thomson Reuters global stock index <.TRXFLDGLPU> were up around 0.2 percent, while emerging stocks <.MSCIEF> were up 0.7 percent.

The Nikkei <.N225> proved the major loser in overnight Asian trade, closing down 0.5 percent after hitting technical resistance and on concerns about corporate profits in the wake of its recent natural disasters.

Traders said all eyes were on the release of U.S. non-farm payrolls data at 1230 GMT, which is expected to show 190,000 people were hired in March, fuelling optimism about the sustainability of growth in the world's largest economy.

A positive reading is set to boost risk appetite as the global recovery begins to gather momentum, said Jonathan Sudaria, night dealer at Capital Spreads.

Among the top movers were Irish banking shares, a day after Dublin released details of stress tests showing its banks needed an extra 24 billion euros, in line with expectations, pushing the total bailout cost to $100 billion.

The STOXX Europe 600 Banks <.SX7P> was up 1.6 percent by 0828 GMT, leading sectoral gainers across the region.

The pre-jobs report, risk-on mode was also evident in the currency markets as the yen fell to a 10-month low against the euro and slid beneath a key technical level against the dollar, which could be set for further gains.

A strong non-farm payrolls number would be reflected in the dollar/yen and it could rise to 84.50 in the short term, said Simon Derrick, head of currency research, at Bank of New York Mellon. We expect to see prolonged yen weakness due to loose monetary and fiscal policy in Japan.

The dollar was up 0.6 percent to 83.65 yen at 0808 GMT, after earlier hitting a six-week high of 83.748 yen on trading platform EBS earlier, and rising above its 200-day moving average against the yen.

The dollar also firmed 0.3 percent against a basket of major currencies <.DXY> and strengthened against the euro to $1.4150.

Hawkish overnight comments from a senior U.S. Federal Reserve official suggesting, in a Wall Street Journal report, the Fed could raise interest rates by three-quarters of a percentage point by the end of the year, also helped buoy the greenback.

Elsewhere among macroeconomic data on Friday, traders will eye the latest U.S. ISM numbers, due out at 1400 GMT. The release follows that of Chinese factory data overnight which showed production rose while cost inflation slowed, easing concerns about monetary tightening.


Government debt markets in Europe were set for another event-filled day, with Portuguese bond yields set to test fresh record highs.

The peripheral euro zone nation -- seen next in line by the markets for an international bailout -- missed its 2010 budget deficit target in the previous session, prompting a widening in its spread to benchmark bunds.

Early on Friday, bund futures were down 32 ticks, continuing its broad downtrend since the start of the year, as traders position themselves for a European Central Bank interest rate rise next week.

U.S. Treasuries were little changed in Asian trading, ahead of the jobs report, while Brent crude rose toward $118 a barrel on expectations for demand from the world's biggest importer.

(Additional reporting by Anirban Nag; Editing by Toby Chopra)