World stocks flirted with record highs on Wednesday and the yen remained under pressure as receding expectations for rising interest rates encouraged investors to chase higher-yielding assets.
In the absence of market moving U.S. data on Wednesday, investors will focus on speeches by Federal Reserve officials and movements in oil prices -- which fell from this week's 10-month high -- for their impact on risk appetite.
Soft U.S. data over the past week has erased expectations for a growth-dampening U.S. interest rate hike, which was triggered by a jump in bond yields earlier this month.
There is some relaxation about possible consequences of the rise in bond yields and how far this might go, said Gerhard Schwarz, strategist at HVB/UniCredit in Munich.
Yields have moved significantly over the last few days, and that is coupled with signs that inflation may not be this imminent problem many had feared.
MSCI's main world equity index rose 0.3 percent, closing in on a lifetime high set earlier in June.
The pan-European FTSEurofirst 300 index was up 0.6 percent, having hit a 6-1/2 year high earlier this week. Shares in Clariant and Ciba rose after the head of U.S. peer Huntsman expressed interest in buying them.
U.S. stock futures were higher, indicating a firmer start on Wall Street.
Tokyo stocks ended up a quarter percent, while Hong Kong and Singapore hit new highs at one point. MSCI's broadest index of shares ex-Japan hit a record high.
CARRY IN VOGUE
Tuesday's data showing a fall in the pace of U.S. home construction, which followed Monday's report on weak home-builder confidence, suggested that the housing market could stay as a drag on the U.S. economy.
A sudden implosion of the housing sector, or some other black swan, could take markets abruptly to the point where contemplation of a severe economic downturn leads to declining risk appetite, HBOS Treasury Services said in a client note.
As yet, however, the general tone of economic data is sufficiently mixed to preclude fears of a housing collapse.
With abundant liquidity chasing yield, the victim of this risk-seeking environment has been the yen as investors borrow in the low-yielding currency to buy high-return assets.
The yen hit a 16-year low against the Australian dollar, while it set a 20-year trough versus the New Zealand dollar.
The euro traded at 165.86 yen, within half a yen of Tuesday's lifetime high. It was steady at $1.3428.
Sterling hit a two-week high against the dollar and short sterling futures fell after the Bank of England minutes showed bigger-than-expected opposition to its decision to keep interest rates on hold this month.
Euro zone government bonds were higher, extending a technical rebound. The September Bund future was up 23 ticks.
The market is awaiting clues on the rate outlook from Fed speakers, including San Francisco Fed President Janet Yellen, New York's Timothy Geithner and Richard Fisher from Dallas.
London benchmark Brent crude oil was down almost one percent, partly on news a general strike in Nigeria had so far failed to interrupt crude shipments.
Gold was slightly weaker at $661.00, near Tuesday's two-week high.