European and Asian stocks climbed on Friday as appetite for risky assets continued to improve following the European Central Bank's huge cash injection, while the yen hit a nine-month low versus the dollar and Japanese importers sold yen.
The FTSEurofirst 300 index of top European shares was up 0.2 percent in early trade, led by a rally in banking shares such as Commerzbank and Societe Generale.
The ECB's action does appear to have made a significant difference and people are more relaxed now. The fact that Italian bond yields have been on a decline in recent days is certainly a helpful factor, said Keith Bowman, equity analyst at Hargreaves Lansdown.
The ECB's half a trillion euros in cheap, 3-year loans added to the banking system this week has helped fuel a 2-1/2 month recovery rally in risky assets, driving down bond yields of debt-stricken euro zone governments such as Italy.
However, the rally that had been sparked by the ECB's first long-term funding operation in mid-December was showing signs of exhaustion on Friday, with European stock indexes failing to convincingly break above key resistance levels while the euro fell below $1.33.
German Bund futures rose, with higher-yielding euro zone government debt looking vulnerable to profit-taking after the ECB's latest cash injection drove Italian two-year yields to their lowest levels in 15 months.
Periphery has had a very good run. I just wonder if it's done a little bit too much too quickly. Italy has tightened this much at the front end, we might see a bit of profit taking and core markets stabilizing as well, a trader said.
The dollar rose to a nine-month high against the yen on Friday on reported yen-selling by Japanese importers, the dollar rose 0.7 percent on the day to 81.718 yen on trading platform EBS, its highest level since late May.
The Japanese currency has taken a hit after the Bank of Japan's surprise monetary easing in February, while the dollar found some reprieve this week after U.S. Federal Reserve Chairman Ben Bernanke stopped short of signaling more stimulus.
Japan's Nikkei average reached a seven-month closing high on Friday, but it failed to hold above 9,800 for a third day as market players warned of a potential correction in the cards.
Brent crude futures slipped below $126 a barrel after surging 5 percent to an 11-month high a day earlier, as concerns over a supply disruption from Saudi Arabia eased.
Oil prices have overshot in the short-term, and with warmer temperatures as we move from winter to spring, oil demand could start to fall, starting in March, said Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong. Brent could fall back below $120 if Iran doesn't flare up.
(Additional reporting by Atul Prakash and Emelia Sithole-Matarise in London)