The dollar steadied on Friday and stocks edged higher ahead of payroll data that could show more evidence of a strengthening U.S. recovery and give investors a reason to push more money into riskier assets.
The FTSEurofirst 300 index of leading European companies <.FTEU3> rose 0.1 percent in early trade, echoing a slightly firmer tone in Asia, but U.S. stock index futures slipped 0.2 percent.
The euro was largely unchanged against the dollar after two days of gains, supported overnight by talk that the European Central Bank of was buying bonds of peripheral countries such as Ireland and Portugal.
With the euro holding at $1.3225 above its 200-day moving average despite the euro zone fiscal crisis, investors ahead of the U.S. payrolls report put cash to work in stock markets, lifting Japan's Nikkei share average briefly to a 6-month intraday high and propelling technology shares.
We expect the Bureau of Labor Statistics' (BLS) to report that the employment situation improved further last month. Indeed, the largest Census-adjusted job gain since April, along with a dip in the jobless rate, should buoy consumers' spirits and purchases during the holiday shopping season, Brian Jones, senior economist with Societe Generale in New York, said in a note.
The Nikkei closed 0.1 percent higher <.N225>, driven mainly by buying of technology stocks such as Canon Inc, which rose 1.5 percent <7751.T>.
Around the region, tech-related shares rallied, partly on expectations for strong U.S. holiday sales. The Thomson Reuters same-store sales index, based on 27 retailers reporting, showed an increase of 6 percent for November, the biggest increase since September 2006.
Shares of Taiwan Semiconductor Manufacturing Co Ltd <2330.TW> popped 3.2 percent to a 2-1/2-year high on trading volume that was 3 times its 30-day average.
For a second day, the technology sector also outperformed in the MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS>. The MSCI index was up 0.5 percent, while the information technology index climbed 1.9 percent.
The broad index extended a 3.5 percent gain in the week, exceeding the weekly returns of Japanese stocks for the first time in three weeks.
The U.S. economy is forecast to have generated 140,000 new jobs in November, with signs of a sustained recovery in private sector hiring combined with solid auto sales and continued industrial growth boding well for the macro outlook.
The improving U.S. economic picture has been a factor lifting the entire U.S. government bond yield curve higher.
The benchmark 10-year U.S. Treasury yield edged down to 3 percent compared with a four-month high of 3.03 percent reached on Thursday. Since Monday, the yield has risen 16 basis points, half of the entire rise since November.
Though the U.S. labor market report will be center stage on Friday, investors will also been watching for follow-through on Thursday's unexpected narrowing in the spread of higher risk European government bond yields over German bond yields.
Many investors outside Europe, including Asian investors, may still want to reduce euro zone government debt holdings, said another trader at a Japanese bank
Market chatter about the European Central Bank stepping into the market to buy bonds in tranches of as much as 100 million euros of at-risk countries such Ireland and Portugal, as reported by the Financial Times, caused the Ireland/Germany 10-year yield spread to narrow to 590 basis points, the least in two weeks.
The Portugal/Germany 10-year yield spread was at 352 basis points, the narrowest since Oct 28.
(Editing by Kim Coghill)