World shares steadied at a five-year high on Friday and bond and commodity markets were consolidating a week of major gains after the U.S. Federal Reserve's shock decision to keep its flow of stimulus steady.
After the sharp moves of Wednesday and Thursday, Asian and early European trading was largely subdued as investors took stock of their positions and locked in some of the gains, with half an eye on German elections on Sunday.
Wall Street was expected to start the day flat to marginally lower with traders due a breather after both the S&P 500 and Dow Jones hit all-time highs after the Fed stunner on Wednesday.
As Europe eased into weekend mode the pan-regional FTSEurofirst 300 , core and peripheral euro zone bond markets were all little changed, while the euro was holding near an eight-month high after its best week since July.
MSCI's index of world shares, which tracks stocks in 45 countries, was also flat but this week's rises, the best in over a year for Asian stocks, put it on track for its first three-week run of plus 2 percent gains since 2009.
Although the Fed's move has spurred markets, for some the obsession with cheap central bank money has raised concerns.
"It's always nice to see equity markets go up but I'm not overly happy that markets are so obsessed with the Fed at the moment," said Uwe Zöllner, head of European equities for Franklin Templeton investments.
"This should not be and must not be base for stock price movement at the moment ... The market at some point later in the year might get ahead of itself and then have to have a second thought."
For the dollar, the reality of extended Fed stimulus has not been good news. It was holding above its week lows against a basket of major currencies having found support after a string of upbeat U.S. data on Thursday.
Analysts at BNP Paribas said they expected the greenback to "recover quickly versus the lower yielding currencies in the G10," while Fadi Zaher, head of bonds and currencies at Kleinwort Benson, said they were also betting on dollar gains.
After being battered in May and June by the prospect of reduced stimulus, emerging market currencies and stocks have some of the biggest winners from Wednesday's Fed move,
Indian financial markets were roiled again on Friday, however, after the Reserve Bank of India unexpectedly raised interest rates by 25 basis points.
The Indian rupee fell 1.0 percent to 62.34 to the dollar while Indian shares fell almost 2 percent.
The Indonesian rupiah also gave up some of Thursday's gains to trade at 11,390 to the dollar, down 1.0 percent on the day. Jakarta shares, which jumped 4.7 percent on Thursday, lost 1.9 percent.
Salman Ahmed, global fixed income strategist, for Lombard Odier said stresses were likely to return to the weaker emerging market countries before too long.
"It is Turkey and Indonesia really that we are focused on, Brazil we think the market has been too harsh on," he said.
"For Turkey the central bank is quite passive and they have refinancing risk so if the mood (on Fed stimulus) changes back again it could be at risk."
GERMAN ELECTION CALM
Thursday's brighter U.S. data, which included a surge in home sales and some encouraging unemployment claims figures, provided a timely reminder that a scaling back of stimulus will come eventually, despite this week's delay.
That helped push the U.S. 10-year notes yield back up to 2.73 percent from a five-week low of 2.67 percent touched just after the Fed's decision and kept the dollar index just clear of a seven-month low at 80.315.
Benchmark 10-year German government bonds were also stable at 1.865 percent at 1130 GMT after yields - which move inversely to prices - sank to a one-month low of 1.812 percent on Thursday.
The euro and the bloc's shares and higher yielding bonds have been supported by recent signs of economic recovery, but some market players are getting nervous before Sunday's German election.
While Chancellor Angela Merkel is likely to win a third term, her lead has narrowed in recent opinion polls and a new eurosceptic party, Alternative for Germany, could make headway in parliament, which might rattle some investors.
"If the party gets 5-to-6 percent of the vote, people will start gauging the risk of Germany leaving the euro. That would be negative for the euro zone," said Arihiro Nagata, head of foreign bond trading at Sumitomo Mitsui Banking Corp.
In the commodities market, oil <LCOc1> edged up from $109 a barrel on Friday after a 1.5 percent drop the previous day on increased Libyan production and signs of a thawing of diplomatic relations between Iran and the West.
Meanwhile, gold <XAU=> - whose reputation as an inflation hedge means it usually benefits from central bank stimulus - hovered at $1,356 an ounce, on track for its best week in five.
"Should the Fed refrain from any moderation in its bond purchase programme for the rest of the year, gold is likely to rally past $1,400 in 2013 before setting a downward course once again in 2014," OCBC Bank said in a note.
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