By Richard Hubbard
LONDON (Reuters) - World share markets stalled near five-year highs and the dollar dipped on Friday as investors braced for monthly jobs data from the United States, which could add to growing concerns over the global growth outlook.
Oil and gold were also supported as the dollar eased while the euro recovered some of its losses against the greenback seen after the European Central Bank cut rates and left the door open for a further easing in policy.
Analysts expect the April nonfarm payrolls report, due at 1230 GMT, to show American employers hired 145,000 people last month, up from March's dismal pace of 88,000 but not enough to erase fears the world's biggest economy is losing steam.
"I think we will see a weak payrolls number," said Fred Goodwin, cross-asset strategist at State Street.
"But we'll have to wait and see if that is a bad-news-is-good-news situation, or if the market will, at some point, begin to really take on board the fact that the data is weakening much more than they thought and it will be an adverse reaction."
The jobs data caps a big week for financial markets that has seen the U.S. Federal Reserve recommit to its aggressive monetary policy easing and the ECB cut rates to record lows and signal further policy easing may lie ahead.
The moves come just a month after the Bank of Japan promised to inject about $1.4 trillion into its economy to spur growth and end decades of deflation.
By increasing liquidity, three of the world's major central banks have fuelled a rally in share and bond markets that has driven many benchmark indexes back up to levels last seen before the financial crisis began, though their actions come in response to signs the global economic recovery is faltering.
MSCI's world equity index, which tracks prices in 45 countries, gained 0.1 percent on Friday to hold around levels last seen in June 2008.
Europe's broad FTSEurofirst 300 index of leading shares dipped slightly but at 1,206.50 points was close to March's closing high of 1,207.83, its highest finish since August 2008. The index has gained 5.1 percent since mid-April, despite a disappointing earnings season.
However, Europe's STOXX 50 Volatility Index, which gauges investors appetite for equities, hit a six-week low, signalling that demand is likely to pick up following the ECB decision.
London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were between 0.1 and 0.2 percent higher.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan edged up to end the week with gains of just over 1 percent, though trading was subdued with Tokyo closed for holidays.
EURO STEADIES
The euro gained against the dollar after a broad sell-off on Thursday when the ECB cut its main rate by a quarter percentage point to a record low of 0.5 percent, the first cut in 10 months. The bank also pledged to provide as much liquidity as the region's banks need well into next year.
The main reason for the sell-off was a statement from ECB President Mario Draghi that the bank could cope with the consequences of cutting its deposit rate below the current zero percent. Such a move would effectively charge banks to hold their money overnight, in a bid to encourage them to lend money and support the recession-hit euro area.
The single currency gains on Friday came when an ECB policymaker, Ewald Nowotny, said the markets might have over-interpreted those comments about negative interest rates.
The euro was trading around $1.3110, up about 0.4 percent for the day, but well down on a two-month high of $1.3243 set on Wednesday.
The dollar meanwhile was weaker against a basket of major currencies as investors focused on whether the upcoming jobs report will add to concerns about the U.S. economy and boost bets on more monetary easing.
"If we have a weak number, expectations will grow for the Fed to act," said Geoffrey Yu, currency strategist at UBS.
The dollar index was down 0.2 percent at 82.03, though the greenback was steady against the yen at 98.09 yen due to a holiday in Japan.
DEBT DEMAND
Most euro zone bond yields were lower as the ECB decision to take action to improve the outlook for the region lifted demand for bonds offering higher returns than safe-haven German debt.
French, Austrian and Belgian 10-year yields fell to new record lows of 1.65 percent, 1.435 percent and 1.903 percent, respectively, while Spain's fell below 4 percent for the first time since October 2010.
The premium demanded by investors to hold 10-year Italian bonds compared with German bonds narrowed to 255 basis points and not far from its tightest level since July 2011.
German 10-year yields were 2 basis points higher at 1.18 percent, just above last July's record low of 1.126 percent.
"Inflation fears are basically vanishing, and investors are buying the whole euro zone fixed income," said Christian Lenk, rate strategist at DZ Bank in Frankfurt.
COMMODITIES
The proof provided by the ECB that the world's big central banks remain firmly committed to supporting their respective economies helped lift commodity markets.
Copper was the standout performer and was on course for its best day in four months, with a jump of more than 2 percent as investors took the view that the central banks moves to stimulate growth would boost demand for industrial metals.
Those hopes helped lift Brent crude 68 cents higher at $103.53 a barrel, while U.S. crude was up 56 cents at $94.55.
However, commodities continue to lag behind stocks and analysts say that, while stocks are being propelled by cheap central bank money, raw materials will remain linked to the weak global economic data.
"It's encouraging that central banks are willing and able to provide the liquidity needed to get out of the slump, but by and large people are still worried about the message behind them, that growth is not satisfactory," said Sijin Cheng, a commodities analyst at Barclays Capital. (Additional reporting by Anirban Nag and Marius Zaharia; Editing by Peter Graff; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
