LONDON World stocks approached their highest level since September 2008 on Thursday on optimism about global growth next year, while the dollar fell on expectations of further money printing in 2011 by the U.S. Federal Reserve.
European shares bucked the rise in global equities, dipping slightly as energy stocks fell, but U.S. stock index futures pointed to a steady open on Wall Street.
Markets are focusing on growth prospects for China, and a survey on Thursday showed the country's vast manufacturing sector continued to expand towards the year-end although at a slightly slower pace than in November.
Expectations for increased demand from China and other emerging economies pushed copper to a fresh record high at $9,550 a tonne , and U.S. crude oil hovered around $91, not far off a two-year high.
Underlying concern about the euro zone debt crisis continued to weigh on markets, however, as Italy sold 8.1 billion euros ($10.7 billion) of medium and long-term debt but missed the top end of its targeted range for 8.5 billion euros and had to pay higher yields to investors.
On the last trading day of 2010 for many Asian, European and Latin American markets, including Japan and Germany, the MSCI world stock index edged up 0.14 percent, close to Sept 2008 highs set in the previous session.
"There may be more upside, and some more money printing. Companies are in good shape with lots of cash .... but you can't just buy and hold," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Germany.
"There are still the systemic risks of the euro zone sovereign debt crisis."
The FTSEurofirst 300 index of top European shares dropped 0.56 percent.
World stocks have gained 10 percent this year, as investors showed modest appetite for risk on growing signs that global economic recovery would continue. Emerging market stocks have climbed 16 percent and European stocks have added 9 percent this year.
The dollar suffered from expectations the Fed's quantitative easing programme would contribute to further currency weakness next year. It hit a record low against the Swiss franc , a 28-year low against the Australian dollar and a seven-week low against the yen , though ongoing concerns about euro zone debt tempered the U.S. currency's losses against the euro .
"The dollar is a weak currency and it will continue to weaken against those currencies that aren't actively trying to disqualify themselves from being an alternative to the dollar, which right now includes the Swiss (franc)," said Ray Farris, currency strategist at Credit Suisse.
The Chinese yuan hit a record high against the dollar since its revaluation in mid-June after the People's Bank of China set a higher mid-point for the currency cross, sparking expectations Beijing will allow the yuan to appreciate further in the first quarter of 2011.
A number of dealers in Shanghai said the yuan could gain around 2 percent in the first three months of 2011 as China needs to fight imported inflation and will face heightened political pressure to let its currency strengthen.
German government bond futures rose 52 ticks, helped by a strong seven-year U.S. Treasury note auction on Wednesday and shrugging off modest demand for Italian debt at auction on Thursday.
"This is the first (euro zone) auction that settles in the new year and I think they will continue to be like this, with moderate demand and big concessions," said Luca Jellinek, head of European rate strategy at Credit Agricole.
Copper prices continued to be driven higher by expectations for restocking by top consumer China in the first quarter although analysts said prices could stall near current levels until after the holidays.
A weak dollar boosted gold to a three-week high at $1,412.45 an ounce, putting it on course for its 10th consecutive annual gain after a near 30 percent rally in 2010, its strongest performance since 2007.
Silver prices shot to new 30-year peaks at $30.88 an ounce, benefiting from strength in other industrial commodities. Silver is now poised for an 83 percent gain this year, its best performance in nearly three decades.
(Additional reporting by Neal Armstrong, Kirsten Donovan and Brian Gorman; Editing by Susan Fenton)