World stocks ticked higher on Wednesday with anxiety over Dubai's debt problems taking a backseat and focus shifting to this week's economic numbers and the European Central Bank's rate meeting.
Euro zone government bond futures edged lower as traders braced for a U.S. private sector report later in the session for hints on the key payrolls numbers due on Friday. Investors were unwilling to take on big bets ahead of the European Central Bank policy meeting on Thursday.
Gold hit a record high above $1,215 an ounce and key base metals rose further, but oil prices came under some pressure on data showing U.S. crude stocks rose much more than expected. The yen broadly weakened as investors moved to stocks and some commodities.
Investor appetite for risky assets rose, with the VDAX-NEW volatility index <.V1XI> down 2 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher the market's desire to take risk.
The broader all-country world index <.MIWD00000PUS> gained 0.1 percent at 0935 GMT, while FTSEurofirst 300 index <.FTEU3> of top European shares was flat after recording its biggest one-day percentage gain in more than four months on Tuesday.
After Tuesday's bounce back it's no real surprise investors are taking a breather today with little about to inspire fresh direction, said Mic Mills, senior trader at ETX Capital.
All eyes are now focused on Friday's U.S. jobs report as the Dubai drubbing fades into the memory, he added.
The international impact of Dubai's shock debt announcement last week lessened considerably amid expectations that the crisis will be largely contained to the emirate and a handful of large creditors and that problems will not infect debt markets much beyond the Gulf.
State-controlled Dubai World
Investors' attention has turned to the ECB's policy meeting on Thursday. It is widely expected to keep its refi rate on hold at one percent, but also to give guidance on the timing and extent of how it intends to withdraw generous liquidity stimulus from the system.
November's U.S. employment report by Automatic Data Processing at 1315 GMT is expected to show 155,000 jobs lost in the month after 203,000 lost in October.
YEN FALLS, BONDS WEAKER
The yen was broadly weaker as traders took Japan's new monetary policy measures, unveiled the previous day, and gains in stocks and some commodities, as signals to sell the ultra low-yielding currency.
The dollar held its ground against most major currencies, however, suggesting the resumption of risk on trades across asset markets, supported by receding fears over Dubai's debt problems, wasn't the principal driver of currencies.
The dollar has been widely considered the funding currency of choice in recent months, as investors have sold the low-yielding unit for other currencies and assets. Asian central banks were said to buying dollars on Tuesday.
The big selling flows in dollar/yen and cross/yen last week are drying up somewhat, said Neil Jones, head of FX hedge fund sales at Mizuho in London.
In the bond market, euro zone government bond futures failed to build on some gains made in late trade on Tuesday and edged down, tracking U.S. Treasuries lower.
We have the (U.S.) ADP employment report coming up. We are a bit nervous going into the ECB, a London trader said.
European corporate credit default swaps were tighter after a rally in stocks. The investment-grade Markit iTraxx Europe index was at 83.50 basis points, according to data from Markit, 1 basis point tighter versus late on Tuesday, according to data from BGC Partners.
(Additional reporting by Jon Hopkins, Emelia Sithole-Matarise and Jamie McGeever; editing by Stephen Nisbet)