* World stocks edge higher after sharp gains on Tuesday
* Euro zone govt bond futures fall, yen under pressure
* Focus on this week's ECB rate decision, economic numbers
By Atul Prakash
LONDON, Dec 2 (Reuters) - World stocks advanced for a third
straight session on Wednesday with anxiety over Dubai's debt
problems taking a backseat and focus shifting to this week's
economic numbers and the European Central Bank's rate meeting.
Euro zone government bond futures fell as traders braced for
a U.S. private sector employment report later in the session for
hints on the key payrolls numbers due on Friday. Investors were
unwilling to take on big bets ahead of the European Central Bank
policy meeting on Thursday.
Gold <XAU=> hit a record high above $1,215 an ounce and key
base metals rose further, but oil <CLc1> came under pressure on
data showing a surprise build in U.S. crude stocks. The yen
broadly weakened as investors moved to stocks and some
commodities.
Investor appetite for risky assets rose, with the VDAX-NEW
volatility index <.V1XI> down 2.2 percent. The lower the index,
which is based on sell and buy options on Frankfurt's top-30
stocks <0#.GDAXI>, the higher the market's desire to take risk.
The broader all-country world index <.MIWD00000PUS> gained
0.1 percent at 1209 GMT, while FTSEurofirst 300 index <>
of top European shares was up 0.2 percent after recording its
biggest one-day gain in more than four months on Tuesday.
"After Tuesday's bounce back it's no real surprise investors
are taking a breather today with little about to inspire fresh
direction," said Mic Mills, senior trader at ETX Capital.
"All eyes are now focused on Friday's U.S jobs report as the
Dubai drubbing fades into the memory," he added.
The international impact of Dubai's shock debt announcement
last week lessened considerably amid expectations that the
crisis will be largely contained to the emirate and a handful of
large creditors and that problems will not infect debt markets
much beyond the Gulf.
State-controlled Dubai World [], which led the
emirate's transformation into a regional hub for finance,
investment and tourism, unveiled details late on Monday of the
restructuring and which parts of its empire were affected. The
process will focus on $26 billion of debt owed by its main
property firms, Nakheel and Limitless. []
Investors' attention has turned to the ECB's policy meeting
on Thursday. It is widely expected to keep its refi rate on hold
at one percent, but also to give guidance on the timing and
extent of how it intends to withdraw generous liquidity stimulus
from the system.
November's U.S. employment report by Automatic Data
Processing at 1315 GMT is expected to show 155,000 jobs lost in
the month after 203,000 lost in October.
YEN FALLS, BONDS WEAKER
The yen was broadly weaker as traders took Japan's new
monetary policy measures, unveiled the previous day, and gains
in stocks and some commodities, as signals to sell the ultra
low-yielding currency.
"We had very strong yen appreciation (recently), and now
there's some retracement. Risk appetite is a little bit stronger
than it was last week when we had the Dubai news, so investors
are taking profits," said Marcus Hettinger, FX strategist at
Credit Suisse in Zurich.
The dollar held its ground against most major currencies,
however, suggesting the resumption of "risk on" trades across
asset markets, supported by receding fears over Dubai's debt
problems, wasn't the principal driver of currencies.
The dollar has been widely considered the funding currency
of choice in recent months, as investors have sold the
low-yielding unit for other currencies and assets. Asian central
banks were said to buying dollars on Tuesday.
"We have seen an upturn in risk appetite overnight. Equities
are still on a firm footing but we are holding stations ahead of
the ECB. That's going to be the key driver for the week," said
Orlando Green, a rate strategist at Calyon in London.
European corporate credit default swaps were slightly
tighter after a rise in stocks. The investment-grade Markit
iTraxx Europe index <ITEEU5Y=GF> was at 83.75 basis points,
according to data from Markit, 0.75 basis point tighter versus
late on Tuesday.
(Additional reporting by Jon Hopkins, Emelia Sithole-Matarise
and Jamie McGeever; editing by Stephen Nisbet and Toby Chopra)
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
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Hub click on http://blogs.reuters.com/hedgehub)
((atul.prakash@reuters.com; +44 20 7542 6189; Reuters
Messaging: atul.prakash.reuters.com@reuters.net))
