LONDON World stocks hit a fresh 6-1/2 month peak on Friday, the dollar jumped to a 3-1/2 month high against the yen and the euro held above recent lows as hopes Greece will seal a long-awaited bailout deal next week fuelled risk appetite.
A strong sentiment boost from Thursday's upbeat U.S. jobs and factory activity data also carried over into European trade.
Italian and Spanish government bond yields fell while oil rose broadly as investors anticipated Greece will move closer to averting a disorderly default.
The country expects to get approval on Monday from euro zone finance ministers to begin a debt swap with private bondholders, a spokesman for the Greek government said.
"The market is remaining strong because of the reasonable news out of Greece, but generally investors are only trading for the short term," Mark Foulds, head of equity sales at ETX Capital, said.
The MSCI world equity index .MIWD00000PUS rose 0.6 percent to its highest since August, while European stocks rose nearly half a percent to hit a 6-1/2 month high.
Emerging stocks added more than 1 percent.
The euro was little changed at $1.3130, but holding well above the three-week trough of around $1.2973 hit on Thursday. The dollar rose as high as 79.17 yen and was little changed against a basket of major currencies.
"The selloff in the yen is down to a combination of a more buoyant mood in equities and the determination of the Japanese authorities to weaken the currency by injecting more money into the economy," said Michael Derks, chief strategist at FXPro.
"It would be a surprise though if we saw much more yen weakness as we could see a flood of yen purchases in March as Japanese year-end approaches."
In a surprise move on Tuesday, the Bank of Japan boosted asset purchases and set an inflation goal of 1 percent, in a more aggressive monetary policy to pull the ailing economy out of deflation.
AWAITING GREECE BAILOUT
Italian 10-year government bond yields fell 11 basis points at one point to 5.60 percent, tightening the spread over German Bunds to 369 bps. Equivalent Spanish yields fell 10 bps to 5.27 percent.
Bund futures fell 34 ticks.
Euro zone officials said on Thursday they were putting the finishing touches to Greece's bailout for approval on Monday, which means Athens would finally be able to proceed with a bond swap with private creditors aiming to cut its debts by 100 billion euros.
The bailout money will be disbursed only after the debt restructuring takes place. Jitters remain due to the tight schedule, with Greece needing to secure the funds before March 20, when it needs to pay back debt worth 14.5 billion euros.
U.S. stock futures were broadly steady after the S&P 500 index .SPX jumped to a new nine-month peak on Thursday after U.S. labour, manufacturing and housing data suggested the recovery continued at a steady pace.
The CBOE Volatility index .VIX, Wall Street's gauge of market nervousness, dropped 8.7 percent on Thursday, its biggest decline since Dec 9.
Brent crude oil rose 0.2 percent to $120.38 per barrel, having risen nearly 8.5 percent so far this month, supported by supply concerns as European buyers sought alternatives to sanctions-hit Iranian oil.
(Editing by John Stonestreet)
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