By Alistair Smout
LONDON (Reuters) - World shares advanced toward their highest level in a month on Friday, although investor wariness over the rising prospects of a near-term interest rate hike by the Federal Reserve subdued activity as traders awaited U.S. jobs data later in the day.
European shares followed Asia higher, with the STOXX Europe 600 (STOXX) up 0.4 percent, boosted by a rebound in commodity-related shares as oil and copper prices both rallied.
The MSCI world equity index (MIWD00000PUS), which tracks shares in 45 countries, rose 0.1 percent to its highest level since the last day of May. A close at these levels would be its highest close since May 2.
U.S. stock futures (ESc1) were flat, with investors looking to a flagship non-farm payrolls report as today's main driver for markets.
U.S. employment data due at 1230 GMT is expected to show a non-farm payroll increase of about 164,000 and a 0.2 percent rise in average wage earnings in May. [ECONUS]
The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15.
"Markets are mainly in a wait-and-see mode ahead of the U.S. jobs data, with the importance of the report rising more than usual this time as the Fed has indicated that it is considering a rate hike sooner rather than later," Philippe Gijsels, head of research at BNP Paribas (PA:BNPP) Fortis, said.
"A jobs figure outside the consensus has the potential to move stock markets quite violently."
Currently U.S. money market futures are pricing in only about 20 percent chance of a hike in June and 60 percent by July.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 0.4 percent, setting it up for a rise of 0.3 percent for the week. Japan's Nikkei (N225) closed up 0.5 percent, paring losses for the week to 1.1 percent.
Chinese shares recovered from a lackluster start, with the CSI 300 index <.CSI300> trading up 0.7 percent and the Shanghai Composite <.SSEC> climbing 0.4 percent. Both posted weekly gains of more than 4 percent.
In recent weeks global markets have been puzzling over what the Fed will do in the near term as relatively upbeat U.S. data have been eclipsed by a still-sluggish global economy and worries over the risk of Britain exiting the European Union.
"Nonfarms remain crucial but the Fed look confident that the labor market and current growth is strong enough to withstand a rate hike, nonetheless we will likely see a swing in the US dollar if figures miss significantly," Ana Thaker, Market Economist at PhillipCapital UK, said in a note.
"The Fed have been sending a hawkish message to markets for months... however, recently we have seen a change in market positioning with some doubts looking to creep in."
The dollar index, which tracks the greenback against a basket of six major peers, edged up 0.1 percent to 95.630.
The euro was down 0.1 percent at $1.1139 on Friday
Against the yen, it last stood at 121.36 after falling to a three-year low of 121.01 yen (EURJPY=R) in the previous session, with investors left underwhelmed by a European Central Bank meeting on Thursday.
The ECB held monetary policy steady, and only nudged up its growth and inflation forecasts fractionally.
The yen edged down to 108.980 per dollar, after hitting a two-week high of 108.5
The yen tends to strengthen when there is bad news on the economy because it is often used as a funding currency for investment in higher-yielding riskier assets.
Oil prices were supported, with international benchmark Brent futures (LCOc1) continuing to trade above the $50 a barrel level, near seven month highs, after the latest drawdown in U.S. crude stockpiles offset OPEC's failure to set a ceiling for its output.
Brent was up 0.2 percent at $50.13, headed for a rise of 1.7 percent for the week. It has rallied for four consecutive weeks, and is up 10.5 percent in that time.
U.S. West Texas Intermediate (WTI) crude futures (CLc1) were up 0.1 percent at $49.21 a barrel. It had tumbled more than $1 earlier in the week, and was flat for the week as a whole.
OPEC failed to agree on a clear oil-output strategy on Thursday as Iran insisted on steeply raising its own production, although Saudi Arabia's new oil minister promised not to flood the market and sought to mend fences within the organization.
Copper
Gold is headed for its fifth consecutive weekly decline, weighed down by the uptick in risk appetite and shift of investments to equities.