By Lionel Laurent
LONDON (Reuters) - European equities paused on Friday as they headed for a sixth straight week of gains, fuelled by a slide in the euro as the European Central Bank's bond-buying plan kept euro zone yields near record lows.
The past week, described by one strategist as a "game-changer", saw the dollar climb to 12-year highs versus the euro as central bank policies diverged in the euro zone and the United States -- the former battling to compress yields further, the latter paving the way for a rate hike.
Emerging markets have felt the squeeze from the rising dollar and weak oil prices, however. Russia was the latest country to cut interest rates on Friday, to 14 percent, putting concerns about the slumping economy before worries about high inflation and continuing an easing cycle that began in January.
Emerging market equities are heading for a second week of losses as the stronger dollar and expectations of a U.S. rate hike keep up pressure.
"I don't think its an exaggeration to say this week has been a game-changer," said Neil Mellor, a currency strategist with Bank of New York Mellon in London, pointing to recent forecast-beating jobs data out of the U.S. and the start this week of the ECB's quantitative easing bond-buying programme.
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"The combination of last Friday's (U.S.) jobs numbers and the launch of QE in Europe this week has cemented the picture of monetary policy divergence."
The MSCI All-Country World equity index was down 0.2 percent at 419.98 points. Emerging-markets stocks fell 0.6 percent and the FTSEurofirst 300 pan-European index was down 0.3 percent, with energy stocks weaker.
U.S. equity futures were down 0.1 percent.
U.S. crude fell almost $1 to $46.10 per barrel, while Brent crude fell to $56.51 per barrel. Oil prices might have stabilised only temporarily because the global oil glut is worsening and U.S. production shows no sign of slowing, the International Energy Agency said.
The Athens ATG share index was down 1.1 percent after European Commission President Jean-Claude Juncker said progress on a deal between Athens and its creditors had been insufficient and said he would make "proposals" to overcome the differences.
Against a basket of six major currencies, the dollar was slightly higher at 99.71 and still close to its highest trading levels since 2003.
The dollar had dipped after disappointing U.S. retail sales data for February, a month marked by harsh weather. That tempered the outlook for first-quarter growth and created some doubt that the Federal Reserve will raise as early as June.
However, many investors still expect rates to rise, after last week's stronger-than-expected U.S. payrolls report. The Fed's policy-setting committee meets on March 17 and 18, and investors hope the meeting will yield further clues about the timing of an increase.
Asian shares put in a mixed performance across the region on Friday but were underpinned by gains on Wall Street. Japan's Nikkei stock average rose 1.4 percent to a 15-year closing high, marking its fifth straight winning week.
"There has been more money going into Japan -- that has been a consistent theme for the last three weeks," said Sean Darby, global equity strategist at Jefferies. The yen's weakness against the dollar, as well as companies returning cash via dividends and share buybacks, are supporting the stock market.
(Reporting by Lionel Laurent; Additional reporting by Patrick Graham, Emelia Sithole-Matarise and Chris Vellacott; Editing by Toby Chopra)