By Dhara Ranasinghe
LONDON (Reuters) - World stock markets reached their highest level in almost five months on Thursday as higher oil prices improved risk appetite and the euro steadied before a European Central Bank meeting.
However, European shares slipped lower as attention turned to the ECB. The bank is expected to keep rates at record lows but may signal a willingness to ease policy again to boost inflation.
The FTSEurofirst 300 index of leading European shares briefly reached its highest level since early January, before falling. U.S. stock futures were little changed, indicating a flat open for Wall Street shares.
"We've had a great run-up in the last few weeks and we're now just starting to pause for a bit on the markets," said Terry Torrison, managing director at Monaco-based McLaren Securities.
Still, the tone in global markets remained upbeat. Oil prices rose to a five-month high as the International Energy Agency said that 2016 would see the biggest drop in non-OPEC production in a generation.
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U.S. crude futures were last up 6 cents at $44.23 a barrel. Crude has now gained 70 percent in value since the lows reached in January and February.
"It looks like the trough in oil is now behind us," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Oil's rally resonated across world markets, with emerging market stocks rising to 5 1/2-month highs and Russian shares racing to record highs.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent, brushing its highest since early November. Japan's Nikkei gained 2.6 percent and the MSCI world equity index rose to its highest level since December.
Other commodities also gained. Copper rose as high as $5,029.50 a tonne, its highest in a month. Silver hit an 11-month high of $17.595 per ounce.
The Thomson Reuters Core Commodity Index rose above its March peak to its highest level since early December.
German 10-year Bund yields rose above 0.20 percent for the first time in a month as the jump in oil prices supported the outlook for inflation and investor appetite for riskier assets.
ECB LOOMS
The ECB is widely expected to refrain from further action after delivering a comprehensive stimulus package in March. But ECB President Mario Draghi is likely to reiterate the case for ultra-loose monetary policy, after German officials disputed the ECB approach to the euro zone's economic malaise.
In London trade, the euro was flat at $1.1298, well below Wednesday's peak of $1.1388. Against the yen, it was little changed at 123.97.
"The FX market is likely to pay particular attention today to what Draghi has to say about further rate cuts," said Lutz Karpowitz, currency strategist at Commerzbank.
"Should he be any more outspoken on the matter than last time round, euro/dollar is likely to ease further. I would certainly steer clear of long positions."
Elsewhere, commodity-linked currencies held firm. The Australian dollar was at $0.7813, after rising to an 11-month high of a $0.7830 on Wednesday.
The Swedish crown gained to its highest level against the euro since March 2015 after the Riksbank kept its key interest rate unchanged at -0.5 percent, as expected, and extended its bond-buying programme.
(Additional reporting by Anirban Nag and Sudip Kar-Gupta; Editing by Larry King)