World stocks rose on Friday, supported by a weaker dollar as investors took the view after weak U.S. economic data this week that the Federal Reserve will be slow to raise interest rates.
Equities have gained this week as risk aversion eased, while commodities regained some stability after a sharp sell-off earlier in May, but mixed economic data has capped advances.
The dollar struggled to make headway against a basket of currencies after data on Thursday showed a slowdown in manufacturing growth in the U.S. Mid-Atlantic region and an unexpected fall in existing home sales in April.
That cemented the view that if economic data continues to disappoint, it could delay Fed action until well into 2012 or later, encouraging investor appetite for riskier assets such as equities.
European shares rose for a third day, tracking gains in the United States that were helped by social network company LinkedIn's solid market debut.
The FTSEurofirst 300 index of top European shares was up 0.6 percent after rising 0.7 percent in the previous session.
Most people don't see this market as being particularly stretched. But there's a concern about where the growth comes from, said Justin Urquhart Stewart, director at Seven Investment Management.
World stocks as measured by MSCI were up 0.4 percent while Asian stocks excluding Japan also inched up.
Japanese stocks ended down 0.1 percent after the Bank of Japan kept interest rates on hold and warned that the economy will remain under strong downward pressure for the time being.
GREEK DEBT RESTRUCTURING TALK
In currency markets, the soft U.S. data gave the euro a respite from recent heavy selling, with the single currency holding much of its overnight gains as investor attention slowly shifted to interest rate differentials from the euro zone sovereign debt crisis.
But the euro remains around 4 percent below an early May peak of $1.4940 after a rout in commodities spooked investors, prompting the unwinding of dollar-funded bets in risky assets.
The euro was 0.2 percent up at $1.4336 on Friday, well above a seven-week low of $1.4048 struck on trading platform EBS earlier this week.
The dollar index was down 0.1 percent <.DXY> after Thursday's data underscored the view the Fed was likely to keep monetary policy easy in the coming months in contrast to the tightening cycle that the European Central Bank has embarked on.
Financial markets remained on edge on persisting concerns about the possibility of debt restructuring in Greece and before the U.S. Federal Reserve's bond-buying program winds down next month.
In our view the Greek situation is being overplayed by the market and we think that the politicians, the European Central Bank and the International Monetary Fund will get around to finding a solution, said Gavin Friend, currency analyst at nabCapital.
German government bonds were slightly firmer as investors kept a wary eye on further talk on a possible Greek debt restructuring.
U.S. Treasury yields softened on weak data, with the 10-year U.S. Treasury yield hovering around 3.17 percent, though some analysts warned the market's six-week rally was near an end. Yields have fallen from as high as 3.62 percent on April 8.
The 19-commodity Reuters-Jefferies CRB index <.CRB>, a popular gauge for market performance, has steadied after tumbling 9 percent from an April 29 high, while oil climbed before a contract expiry, and spot gold rose on bargain hunting.
(Reporting by Emelia Sithole-Matarise; Additional reporting by Anirban Nag and Brian Gorman; Editing by Hugh Lawson)