World shares hit their highest level since June 2008 and the dollar touched a fresh three-and-a-half year high against the yen today, ahead of US jobs data expected to point to a continuing pick up in the world's biggest economy.
China also gave markets a boost as official data showed February exports grew 21.8 per cent versus a year ago, more than double the expected rise.
European shares, which have rebounded strongly after last week's Italian election and US spending cuts-related wobble, were up 0.5 per cent by mid-morning and on track for their biggest weekly gain since the start of the year.
Japan's Nikkei hit a 4-1/2 year high in Asian trading and 0.3, 0.7 and 0.5 rises by London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX helped MSCI's world share index to its highest level since late June 2008.
"There appears to be a strong risk-on mood in the market at the moment," said Ken Wattret, co head of European market economics at BNP Paribas. "The negativity from the Italian elections was shrugged off pretty quickly, the Fed has made it clear that its policy will remain accommodative. If we get a get a good set of payrolls numbers, that will further fuel that sentiment."
Investors have been returning to stocks and other riskier assets over the last eight months as slowly improving world growth has been bolstered by the European Central Bank's pledge last August to prevent a break-up of the euro.
Today's US payrolls report, due at lunchtime, is expected to show US employers added 160,000 jobs last month, picking up slightly from January's 157,000 count.
It is key to gauging the Federal Reserve's policy course following the central bank's promise that as long as inflation doesn't pose a threat it will keep US interest rates near-zero until unemployment falls to 6.5 per cent.
With demand for low-risk assets cool ahead of the US data, German Bund futures were little changed at 142.86 by mid-morning having fallen the previous day after the ECB's less dovish than expected tone.
Italian bonds continued to claw back the ground they lost after last week's inconclusive election result re-ignited concerns about its fiscal rehabilitation programme. The stronger dollar and the bright Chinese data were also the focus of commodity markets. Most of the world's raw materials are bought and sold in dollars so its movements can have a strong influence on prices.
Oil prices steadied above $111 a barrel, leaving them almost bang in line with where they started the year, while both copper and gold were little changed. After a week which has seen five the world's top 10 central banks decide to leave policy unchanged in the face of a very modest global growth outlook, expectations for gradual gains in riskier assets are unchanged.
"We continue to look for ways to gradually build risk rather than reduce, and what we're seeing from the central banks leaves us unchanged in that view," Johan Jooste, chief market strategist at Merrill Lynch Wealth Management said. "It's not like we're sittings on our hands. What we're doing is, at the margin, adding risk rather than piling straight into it at these levels."
