By Marc Jones
LONDON (Reuters) - Weaker stocks in parts of Europe were not enough to halt world shares on Monday, as upbeat Chinese trade data added to cautious optimism that the world's economy and markets can cope with a gradual withdrawal of U.S. stimulus.
The moves helped both the dollar and the euro extend their gains on the yen, with the euro zone's currency hitting a new five-year high in what should be a boost to Japanese exports, profits and stocks.
In Tokyo, the Nikkei <.N225> climbed 2.3 percent and was fast approaching last week's peak at 15,794, leading a broad rise in Asian markets <.MIAPJ0000PUS.>
The upbeat sentiment had faded by the time it reached Europe, however.
Paris's CAC 40 <.FCHI> and then London's FTSE <.FTSE> turned lower to leave only Frankfurt's Dax <.GDAXI> holding in positive territory as robust trade data offset a surprise fall in factory output.
Wall Street, meanwhile, was expected to see a flat start to the week. Though both the S&P 500 <.SPX> and Dow Jones Industrial <.DJI> bounced over 1 percent on Friday, they suffered their first weekly fall in nine. <.N>
While Friday's solid U.S. jobs report may have brought forward the day when the Federal Reserve starts tapering its asset buying, the figures also suggested the economy was recovering well enough to withstand the move.
A total of 203,000 jobs were added in November, while the unemployment rate dropped three-tenths of a percentage point to a five-year low of 7 percent.
"What is interesting is that markets are not pricing in any significant fall in stocks in January," said Ramin Nakisa, a global macro strategist at UBS in London, referring to the month UBS expects tapering to start.
The Fed has had considerable success in persuading investors that tapering is not tightening, and that interest rates will remain low for a long time to come.
Treasuries and European bonds remained resilient through the morning, with German bonds barely budged and 10-year U.S. yields steady at just below 2.85 percent having briefly spike to 2.93 percent on Friday.
The improvement in risk appetite knocked safe havens like the yen, lifting the U.S. dollar as high as 103.23 yen on Monday and not far from last week's highs around 103.37 before it faded back to 102.90.
The euro had shot up to 141.55 yen, territory not visited since October 2008, while also making ground on the U.S. dollar. It briefly touched $1.3748 early on Monday before edging back to last trade at $1.3703.
The currency has been underpinned by rising short-term interest rates after the European Central Bank dampened hopes for an imminent easing move.
"To define portfolios of government bonds of euro zone member states and then to buy them would pose immense economic, legal and political challenges for the ECB," one of the central bank's top policymakers, Yves Mersch, said in Frankfurt.
Aiding sentiment in Asia was a set of robust trade numbers from regional powerhouse China over the weekend, encouraging the central bank to set the yuan at a fresh record high.
China's exports came in well above forecast in November, rising 12.7 percent from a year earlier, while imports rose 5.3 percent.
"The strength is likely supported by the recent improvement in global manufacturing activity, as evidenced by the strong(purchasing manager indexes) prints in major advanced economies," wrote analysts at Barclays.
That should be positive for many commodities with China importing a record amount of iron ore in November, while oil imports rebounded.
Prices for iron ore have been surprisingly firm around $139 a ton recently, good news for Australia as it is the country's single biggest export earner.
That helped the Australian dollar nudge ahead to as much as $0.9145 on Monday before some profit taking kicked-in, well up from Friday's lows around $0.8989.
Emerging market attention remained on Thailand after Prime Minister Yingluck Shinawatra called snaps elections in an attempt to defuse the country's tensions.
The Thai baht rose almost 1 percent versus the dollar initially only to backslide along with Bangkok shares <.SETI> as anti-government protest leaders vowed to fight on.
U.S. crude oil futures were trading 24 cents firmer at $97.65, having surged more than 5 percent last week. Brent edged around $111.61 a barrel.
Gold has not been so fortunate, stuck at $1,228.56 and only just above five-month lows.
(Additional reporting by Wayne Cole in Sydney)