By Marc Jones
LONDON (Reuters) - World shares were within touching distance of an all-time high on Monday, spurred on by the potent combination of record low global interest rates and the improving health of major economies.
European markets were on the front foot again, looking for their 10th straight week of gains after last week's bumper set of easing measures from the European Central Bank.
Asian stocks earlier touched their highest levels in nearly three years, while Wall Street was expected to start steadily, having notched another record close on Friday following bright U.S. jobs data.
MSCI's All-World share index, which encompasses 45 countries and is generally seen as benchmark of global stocks, was up 0.1 percent at 426.77 points, just below its 2007 pre-financial crisis peak of 428.63 points.
It has risen almost 150 percent since the 2009 lows of the crisis but with central banks like the ECB still hosing markets with cheap money, Peter Sullivan, HSBC's head of equity strategy in Europe, said the rally was likely to continue.
"We might be sitting close to all-time highs but valuations are not stretched," Sullivan said. "We got more confirmation last week (from the ECB) that policy is going to remain very loose for a long time."
"In the U.S. it's clear that earnings are coming back pretty strongly and there are even signs of life now in Europe ... So you put that together and it's certainly more likely that equities rise rather than fall from here," he said.
Trading was thinner than usual due to public holidays in a handful of countries including Germany and France, but the strong appetite for risk in the region was hard to miss.
Spanish and Italian bond yields, a proxy for what their governments pay to borrow on financial markets, were at all-time lows with Spain enjoying lower yields than the United States.
Safe-haven gold, meanwhile, was stuck near a four-month low and market volatility indicators such as the so-called VIC fear gauge remained heavily subdued.
EMERGING DEMAND
Emerging markets were also performing strongly with stocks on the cusp of a one-year high and a number of key currencies on the rise.
The South Korean won touched a near six-year peak although intervention by the foreign exchange authorities capped its upside, while Malaysia's ringgit hit a near seven-month high.
Among major currencies, the dollar continued to benefit from rising U.S. Treasury yields, after U.S. jobs data on Friday showed employment back at its pre-recession level.
The euro drifted down to $1.3615 as the dust settled after last week's ECB frenzy of activity, though there was plenty of daylight between it and its $1.3502 low.
Weekend trade data from China also supported the view of a recovering global economy, with exports gaining steam last month. But the same figures also contained some cause for concern, as a surprising drop in imports could herald weaker domestic demand.
China's yuan rose after the People's Bank of China unexpectedly fixed its daily midpoint higher against the dollar for the second straight session, which in turn also gave a lift to other Asian currencies.
A subsequent - but well-flagged - move by the PBOC to reduce the amount of precautionary funding some of country's farming-focused banks must hold had no obvious impact.
RISING U.S. YIELDS HELP DOLLAR
While the lingering effects of the euro crisis and sluggishness in Asia has kept global stocks short of all-time highs, U.S. equity markets have been there for months.
Having risen in 10 of the past 12 sessions and closed at records in six out of seven, the S&P 500 was expected to open virtually flat. Heavier action is likely on the Nasdaq, where gadget giant Apple will trade for the first time after a seven-for-one stock split.
The yield on benchmark U.S 10-year Treasuries meanwhile shuffled up to 2.6131 percent in Europe as it continued to move away from last month's 11-low.
Treasuries tend to set the benchmark for borrowing costs around the world, and their rally this year has baffled many economists, who had predicted the U.S. economy would perform more strongly and therefore expected a sell-off in the bonds.
"The yield on 10-year U.S. Treasuries may need to sustain a move back above (the) 2.6 percent area to increase the likelihood of the greenback move through the 102.80 level against the yen," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a note to clients.
For now, the dollar had to be content with a slight gain on the day to 102.44 yen having had some help in Asia from a lower-than-expected April current account surplus in Japan.
In commodities, U.S. crude and Brent oil gained about 0.8 and 0.7 percent to $103.48 and $109.38 a barrel respectively, underpinned by the solid jobs report that in theory should translate to higher oil demand.
Spot gold was steady near a four-month low at $1,255 an ounce, while Shanghai copper fell to its lowest in nearly a month and London copper also dropped, unsettled by concerns that a probe into metals storage at China's third-largest port could squeeze financing and buying in metals.
(Additional reporting by Lisa Twaronite; Editing by Catherine Evans)
