The euro jumped as strong demand at auctions for Italian and Spanish government debt on Thursday eased fears over the region's debt crisis, while gold rose to a one-week high.
World and U.S. stocks edged into positive territory, while European indices ended lower.
Comments by the president of European Central Bank extended gold's gain to a third consecutive day, as well as the euro's rally.
Concerns that the euro zone economy is suffering through a debt crisis, and possibly in recession, while the U.S. economy is slowly improving have pressured the euro and lifted euro-priced gold.
But in a positive development, Spain on Thursday sold twice as much three-year debt as it needed and Italy paid less than it did a month ago on one-year securities at their first auctions of 2012 as cheap money lent to banks by the ECB in December fuelled demand for shorter-term debt.
Italy will sell up to 4.75 billion euros of debt, including its three-year benchmark issue, on Friday.
European Central Bank President Mario Draghi cited signs of stabilization in the euro zone, which boosted the common currency. The euro was last up 1 percent at $1.283 against the U.S. dollar.
He's saying the loan facilities are working and he's really pressing policymakers to move toward a fiscal compact. Markets are taking that as a hopeful sign, said Boris Schlossberg, head of research at GFT Forex in Jersey City, New Jersey.
He acknowledges the downside economic risks but also said survey data has shown some signs of stabilization. So that is offering a ray of sunshine, a hope that maybe they can skirt a recession.
As expected, the ECB left its key interest rate unchanged at a record low 1.0 percent at Thursday's policy meeting as it assesses the impact of back-to-back cuts and a slew of other measures unleashed late last year that are showing signs of helping fight the euro zone debt crisis.
Spain's risk premium, the spread between yields on Spanish and German benchmark bonds, narrowed to its tightest level since January 3 after the auction results and the yield on its 10-year bonds eased to 5.14 percent, near the low for the year.
The yield on Italian 12-month bills fell to 2.735 percent from the near-6 percent Italy paid to sell one-year paper at a mid-December auction and the lowest level since June 2011.
In stock markets, world stocks as measured by the MSCI World Equity Index <.MIWD00000PUS> were up 0.3 percent, while the FTSEurofirst index <.FTEU3> index of top European shares ended down 0.3 percent.
U.S. stocks edged into positive territory late in the session. The well-received sovereign debt sales were offset by downbeat U.S. economic data, as well as a profit warning by Chevron Corp
The Dow Jones industrial average <.DJI> was up 14.65 points, or 0.12 percent, at 12,464.10. The Standard & Poor's 500 Index <.SPX> was up 2.39 points, or 0.18 percent, at 1,294.87. The Nasdaq Composite Index <.IXIC> was up 12.59 points, or 0.46 percent, at 2,723.35.
Data showed U.S. retail sales rose at the weakest pace in seven months and the number of Americans applying for first-time jobless benefits rose last week.
It confirms the trend of positive data in the context of an overall weak economic landscape, said Quincy Krosby, market strategist for Prudential Securities.
The question that has been haunting the market for some time is the underlying strength of the U.S. economy. Although we have had some strong numbers recently, today's numbers were less than expected, disappointing the market.
Disappointing news on European manufacturing also weighed on sentiment, reinforcing the view that the euro zone economy entered a recession in the final quarter of 2011.
GOLD, OIL HIGHER; U.S. BONDS SLIP
Spot gold was up 0.4 percent at $1,646.54 an ounce, having earlier touched a one-month high at $1,661.71.
Brent and U.S. crude futures were higher in volatile trading. The euro rally, as well as worries about supply disruptions, helped boost dollar-denominated oil. Nigeria's main oil union threatened to shut output.
Brent February crude was last up 66 cents at $112.90.
In the U.S. Treasury market, debt prices fell. The benchmark 10-year note was last down 8/32, the yield at 1.93 percent.
Treasuries underperformed German Bunds, with their 10-year yield premium over 10-year Bunds widening to nearly 9 basis points, up from 7 basis points on Wednesday.
(Reporting by Caroline Valetkevitch; Additional reporting by Richard Hubbard in London and Julie Haviv, Angela Moon, Frank Tange and Gene Ramos in New York; Editing by Dan Grebler)