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London - World stocks held near three-week highs on Wednesday while the euro touched a close to one-month peak as investors hoped for concrete progress on a fresh bailout deal for Greece that would ease fears of an immediate default.
Surveys showing factory growth eased in Europe and Asia introduced a note of caution before the Federal Reserve completes its $600bn bond-buying programme (QE2) later this month.
European finance officials are meeting in Vienna later to work out a solution to a looming funding shortage for Greece.
The prospect of an aid deal and reports the EU, IMF and ECB will conclude talks on a medium-term fiscal plan for Greece this week boosted risky assets, but uncertainty remained on whether private sector debt holders would participate in helping ease the burden.
"I fear this will be a temporary relief. Of course clarity and more money is helpful in the short run, but this doesn't solve the long-term problems," said Niels From, chief analyst at Nordea in Copenhagen. The MSCI world equity index was steady on the day. The benchmark index ended May with a loss of 2.5%, reducing year-to-date gains to just over 5%.
The FTSEurofirst 300 index was down 0.1% while emerging stocks rose a quarter of a percent. US stock futures were down 0.1%, pointing to a weaker start on Wall Street later.
"With the QE2 package due to expire at the end of the month, there's no shortage of uncertainty as to what happens when the easy money disappears," said Cameron Peacock, market analyst at IG Markets.
Given the euro zone debt crisis and a soft patch in economic data, investors reduced their exposure to stocks in May for the fourth month in a row, Reuters polls showed.
At their most pessimistic since the third quarter of 2010, they moved into bonds and cash, according to the surveys.
US crude oil slipped 0.1% to $102.56 a barrel on Wednesday, but losses were limited due to disruptions to oil supplies to top consumer the United States and a political upheaval in Yemen.
Bund futures were down 53 ticks.
The euro rose to $1.4448, its highest since May 5, before trimming gains, and the dollar fell 0.1% against a basket of major currencies.
Two surveys showed Chinese factories expanded in May for the 27th straight month, although at a slower pace, suggesting government efforts to curb credit are helping to cool the economy.
In Europe, fresh signs of decline among factories on the euro zone's debt-laden periphery tugged sharply on manufacturing growth across the region as a whole in May.
