World stocks stretched to record highs on Wednesday, led by emerging markets, while the dollar slipped on reduced hopes of a new U.S. interest rate cut.

MSCI's main world stock index and its emerging market stock counterpart were both at all-time highs after the Dow Jones industrial average and S&P 500 scaled similar peaks on Tuesday.

Wall Street looked set for a subdued start on Wednesday after the gains and European shares were flat.

Catalyst for the generally bullish mood were U.S. Federal Reserve minutes released on Tuesday which showed policymakers expected somewhat slower U.S. economic growth and lower inflation risks.

Equity investors tended to focus on the longer-term implications for growth with the prospects of the Fed acting to combat problems with lower interest rates if needed.

Most investors are no longer so worried about the U.S. economy, and there are expectations that the Fed will continue to lower rates if the U.S. economy slows down, said Cho Seong-joon, an analyst at SK Securities in South Korea.

The FTSEurofirst 300 index of top European shares was flat but sentiment was generally bullish.

Unless you believe that a deep recession is just around the corner, they (equities) have to be the asset of preference, said Peter Lucas, global investment strategist at fund firm Ashburton.

Earlier, Japan's Nikkei stock average ended almost flat after erasing early gains. It closed up 0.1 percent or 17.99 points at 17,177.89. The broader TOPIX index was down 0.1 percent at 1,658.18.


The dollar slipped on worries that the Fed might still to have to cut rates this year to ease the effects of a downturn in the U.S. housing market.

The dollar index -- which tracks the greenback's performance against six major currencies -- was down 0.2 on the day at 78.394, still near Tuesday's two-week high of 78.891. On October 1, the index hit an all-time low of 77.660.

The euro rose 0.2 percent to $1.4129.

Euro zone government debt futures fell after U.S. debt traders pushed Treasury prices lower on the conviction that the Federal Reserve is unlikely to cut rates this month.

Euro zone government bond yields were up. Yields on the benchmark 10-year Bund were at 4.361 percent, compared with 4.338 percent late on Tuesday.