World stocks hovered below record highs on Friday, set to reverse two straight weeks of losses while the euro hit its highest levels in six weeks following stronger than expected economic data this week.

The MSCI World Index, which tracks shares in 47 countries, was up 0.1 per cent, set for a 1 per cent gain this week. Its climb was underpinned by modest gains in Europe and Asia. Emerging stocks were up 0.2 per cent and the pan-European STOXX 600 was up 0.1 per cent.

Surveys on Thursday covering Europe's services and manufacturing industries outshone the most optimistic forecasts in Reuters polls, with factories having the second-best month in the index's history.

“It's a bit of a Goldilocks situation (for economic growth). It is finely balanced and I think the European Central Bank has very much hinted at that in its actions, but at the moment I cant really see how this is going to be up-ended,” said Ken Odeluga, market analyst at City Index.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent, as Hong Kong shares bucked the softness in mainland Chinese shares to gain 0.6 per cent.

Stocks in mainland China dropped to three-month lows after big falls the previous day on concerns about fresh government steps to curb financial risks and rise in Chinese bond yields.

Japan's Nikkei ended up 0.1 per cent after a market holiday on Thursday, while US stock futures were little changed after shortened trading on Thursday.

In the currency market, the US dollar remained under pressure after the minutes from the US Federal Reserve's latest policy meeting highlighted concern among some of the board members over persistently low inflation. The index that measures the greenback against a basket of peers was 0.2 per cent lower.

The euro hit its highest in nearly two months at $1.1875 and was on track to mark its third consecutive week of gains despite failure of coalition talks in Germany earlier this week.

The leader of country's Social Democrats is coming under growing pressure to drop his opposition to a new “grand coalition” with Chancellor Angela Merkel's conservatives, with senior politicians arguing the party had a duty to promote stability.

A weaker dollar saw the British pound staying near a six-week high against the dollar ahead of British Prime Minister Theresa May's visit to Brussels later in the day for talk on Brexit.

China concerns

Although solid global economic growth and strong corporate earnings have underpinned shares in Asia and many other parts of the world, a tumble in mainland Chinese shares caught some investors' attention.

The CSI300 index fell as much as 0.9 per cent to a three-month low in choppy trade after a 3.0 percent fall - its biggest in almost a year-and-a-half - on Thursday, as a sell-off in domestic bonds that has been underway since last month gnawed away at investor sentiment. In late trade, the index was almost flat.

Investors were also reacting to new policies aimed at curbing micro-lending and tightening regulation of asset management businesses.

The start-up board Chinext Index hit its lowest level since mid-August and last stood down 0.3 per cent, ahead of potential swell in selling of small shares in the next couple of months from institutional investors after their IPO (Initial Public Offering) lock-up period ends.

Earlier this month Chinese stocks had risen almost 15 per cent from their lows hit in May, and analysts said some investors were selling to lock in profits.

US crude futures hit a two-year high on the shutdown of Keystone pipeline, a major crude pipeline from Canada to the United States. US West Texas Intermediate (WTI) crude futures were up 0.9 percent at $58.53 a barrel from their last settlement. International benchmark Brent futures held firm at $63.46, down 0.1 per cent on the day.

In a sign of a tightening market, both crude benchmarks are in backwardation, where spot prices are higher than those for future delivery, which makes it unattractive for traders to store oil for later sale.

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