European shares and the euro steadied on Friday, with both on course to end the week down as worries about the euro zone's crisis strategy, the upcoming U.S. election and slowing global economic growth limit the appeal of riskier assets.
A central bank stimulus-inspired rally that pushed global equities up around 15 percent since early June has stalled this week as investors wait to see whether yet-to-be-deployed ECB bond purchases can calm the euro zone's crisis and whether stuttering global growth will revive.
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Having enjoyed a 1.2 percent gain on Thursday, the Euro STOXX 50 index of top European blue-chips had dropped back 0.2 percent to 2478.57 points by mid-morning, leaving it on course to end the week 1.4 percent lower.
"With concerns over the state of the global economy coming to the fore this week, along with negative sentiment surrounding a Chinese slowdown, and earnings season and the fiscal cliff garnering negative attention in the U.S., visibility for equity markets in the short term remains clouded to say the least," said Daniel Victory at Capital Spreads in London.
London's FTSE 100 , Frankfurt's DAX and the CAC in Paris were all in negative territory and MSCI index of global stocks <.MIWD00000PUS> was flat.
Japan's Nikkei <.N225> fell to its lowest level in more than two months in Asian trading, while U.S. stock futures pointed to a fractionally higher open on Wall Street where the main focus will be on JP Morgan earnings, the University of Michigan's preliminary consumer sentiment survey and September PPI data.
Many markets have become stuck in ranges since the start of the month as investors wait to see whether Spain requests a bailout, a prerequisite for the ECB to buys its bonds.
The euro, which has tracked between $1.28 and $1.3070 over the last two weeks was at $1.2974, up 0.4 percent on the day but down 0.4 percent week-on-week. The dollar was a tad weaker when measured against a basket of currencies .
With the ECB waiting in the wings, currency strategists think there is limited downside to the single currency at present.
"Negative news from the periphery of Europe is now being viewed as nudging Spain closer to seeking assistance from the EU," analysts at Morgan Stanley, wrote in a note.
"We believe that EUR/USD has traded a corrective bottom, holding above the 200-day moving average at 1.2825. We now expect a resumption of the recovery trend to start to unfold."
Following better-than-expected national figures earlier in the week, euro zone data confirmed factory output in the bloc grew much more than forecast in August. It is unlikely to prevent the region sliding back into recession.
German Bund futures tracked gains in U.S. Treasuries, but traders expected another quiet session with no more clarity yet on when Spain will seek a bailout. Ten-year Spanish bond yields were down 3.6 basis points at 5.75 percent but were within recent ranges.
Next week will be another opportunity for the bloc to make progress with its crisis strategy when EU leaders meet in Brussels on Thursday.
One of the main issues markets hope to be ironed out is the apparent back pedaling by Germany, the Netherlands and Finland on plans to share the cost of recapitalizing Spanish banks.
"Once the single supervisory mechanism is established the ESM (euro zone bailout fund) should be rapidly given the possibility to recapitalize banks directly," Italy's Prime Minister Mario Monti urged late on Thursday.
Commodities - with the exception of oil - were also mostly set to end the week in the red as investors fretted about the slowdown in China, which is due to release its latest trade data at the weekend.
Gold was trading at $1,766.80 an ounce, on course for a 0.6-percent weekly loss, its sharpest one-week drop in two months. The story was the same for copper which edged down 0.5 percent to $8,170 a tonne.
Tensions between Turkey and Syria continued to support oil with Brent crude down about 70 cents to hover around $115 a barrel, but still set for its biggest weekly gain since August.
"Crude is responding positively to the U.S. economic data and ongoing tensions in the Middle East are adding to supply concerns," said Tim Waterer, a senior trader at CMC Global Markets in Sydney.
Investors were also cautious ahead of a busy day of U.S. data. With the third quarter U.S. reporting season under way eyes are also on how JP Morgan fares when it posts its results later on Friday in the United States.
Inflation data are expected to show U.S. producer prices rising 0.7 percent according to a Reuters poll of economists after a rise of 1.7 percent in August. Preliminary University of Michigan sentiment figures are seen climbing to 78.5 from the 78.3 in late September.
"Although the economic scenario has not changed much in the past few weeks, the IBD/TIPP Economic Optimism index has shown a considerable increase in October and confidence is also expected to be supported by the good news of falling unemployment," said Annalisa Piazza at Newedge Strategy.
(Reporting by Marc Jones; Editing by Peter Graff)