World shares hovered near a 20-month high on Friday as upbeat comments from the European Central Bank and a massive stimulus plan in Japan boosted optimism about the global economic outlook.
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Strong Chinese trade figures on Thursday had already raised expectations of a steady global recovery this year, although data of Friday showing a pick-up in the country's inflation rate prompted some profit-taking on Asian shares outside Japan and hit oil.
The MSCI index of world shares edged up 0.1 percent to 350.08 points, close to its highest level since early May, 2011.
At its monthly policy meeting, the ECB said on Thursday that the euro zone economy will recover in 2013 and that it had decided unanimously to keep interest rates at a record low of 0.75 percent without even discussing a further cut.
"The (market) optimism is exceptionally exuberant at the moment and it comes on the back of the unanimous vote in the ECB yesterday on rates," said Brenda Kelly, markets analyst at financial spread-betting company IG.
Europe's FTSEurofirst 300 index of top companies across the region also neared levels last seen in March 2011 shortly after the ECB decision and was consolidating those gains on Friday to be little changed at 1,164.49 points.
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London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were all broadly steady as well.
U.S. stock index futures indicated a flat-to-slightly lower open on Wall Street on Friday, with some traders citing nervousness before bank earnings reports for the fourth quarter due to start later in the day.
"Equities are very overdue a rest but that shouldn't make people throw in the towel in my opinion (as) they will continue to be supported by central banks' very accommodative policies," said Edward Page Croft, managing director at investment advisory firm Stockopedia.
The euro was down about 0.1 percent at $1.3263 but only because the ECB's more upbeat views had sent the common currency up 1.6 percent on Thursday, giving its biggest daily gain in five months.
In fixed income markets Italy took advantage of the better sentiment to sell 3.5 billion euros of new three-year government bonds at the lowest cost since March 2010.
The Italian auction followed a well received Spanish debt sale on Thursday, and reflects a growing view among investors that the worst of the euro zone's three-year debt crisis has passed, due largely to the efforts of the ECB.
"The ECB is turning more confident about the outlook on financial conditions in Europe even though they've closed the door on a rate cut for now and that positive sentiment has helped the Italian auction," Nick Stamenkovic, bond strategist at RIA Capital Markets said.
Meanwhile the yen fell against the dollar after the Japanese government approved a $117 billion spending boost for the economy, and Prime Minister Shinzo Abe stepped up pressure on the Bank of Japan to ease monetary policy more aggressively.
The BOJ is likely to adopt a 2 percent inflation target at its Jan. 21-22 meeting, double its current goal, and will consider increasing purchases of government debt to achieve the target, sources told Reuters this week.
The prospect of looser monetary and fiscal policy when new data has revealed that Japan's current account deficit is deteriorating - meaning it will need to attract funds from overseas - has put enormous pressure on the yen.
The dollar was up 0.2 percent at 88.98 yen, a fresh 2-1/2 year high and was heading for 95 yen by the end of the first quarter, according to Ian Stannard, head of European FX strategy at Morgan Stanley. "The pace of increase, not just (in dollar/yen) but also the pace of policy reforms in Japan, is exceeding market expectations," he said.
Oil prices reacted to the higher-than-expected Chinese inflation and the current lacklustre growth in the global economy, with Brent crude futures falling back towards $111 a barrel.
Output cuts from top oil exporter Saudi Arabia revealed earlier this week suggested that Riyadh was worried about demand, at least at the start of the year, and faster-than-expected inflation in China may limit growth in the world's second-biggest oil consumer.
Brent futures lost 62 cents to $111.27 per barrel while U.S. crude was off 24 cents at $93.58.
Gold prices slipped below $1,670 an ounce as the firmer tone to the dollar prompted some buyers to cash in gains after the metal's biggest one-day rise this year.