World stocks edged higher on Friday as investors grew more confident about the prospect for economic recovery following robust U.S. and Chinese data while Treasuries stabilized after a sell-off earlier this week.
Friday's data showed China's imports and exports were much stronger than expected in November, robust numbers that served a reminder that Chinese demand was still growing apace and could pave the way for an interest rate rise as soon as this weekend.
Recent figures suggest the United States and stronger European economies are also picking up steam.
The Chinese numbers and the performance of the U.S. overnight justify a higher start, Heino Ruland, strategist at Ruland Research in Frankfurt, said.
On Wall Street on Thursday, the benchmark S&P 500 index <.SPX> hit a two-year high with data showing first-time claims for jobless benefits fell more than expected last week.
MSCI world equity index <.MIWD00000PUS> rose 0.1 percent while the FTSEurofirst 300 index <.FTEU3> gained the same amount.
U.S. Treasuries edged up thanks to a strong auction of 30-year bonds that reflected investor appetite. Treasuries sold off heavily earlier in the week on U.S. President Barack Obama's plans to extend low tax rates. However, those plans hit some opposition ahead of a Senate vote next week.
Rising U.S. Treasury yields this week and growing inflation concerns in developing economies -- together with the prospect of tighter Chinese policy -- also encouraged investors to scale back their already overstretched bets on emerging markets.
Emerging stocks <.MSCIEF> lost 0.2 percent, partly on concerns about China's possible measures to tighten the economy.
Data all suggest that further policy normalization is needed to keep China's economy on an even keel. So far, China has made only modest moves in this direction, RBC said in a note to clients.
We expect to see more urgency from Beijing in the months ahead as tackling inflation becomes a greater priority, with both rate hikes and currency appreciation likely to be employed.
Ten-year Treasuries were up 8/32 in price to yield 3.185 percent, off a six-month high of 3.330 percent reached on Wednesday.
The sale of $13 billion of reopened 30-year U.S. bonds went through at a yield below the level trading on the open market, indicating investors bid aggressively for the debt, with strong demand particularly from foreign buyers.
The dollar <.DXY> was steady against a basket of major currencies, while the euro was also unchanged at $1.3236.
U.S. crude oil rose a quarter percent to $88.59 a barrel. The bund futures rose 0.2 percent.
(Reporting by Natsuko Waki, editing by Mike Peacock)