The euro edged higher and European stocks pulled back on Thursday as investors waited to see what message ECB chief Mario Draghi will send after the European Central Bank's monthly meeting, following another run of poor euro zone data.

Markets were also watching for signs Draghi may temper his readiness for more aggressive stimulus given reports of internal opposition to his leadership style and long-standing unease about quantitative easing.

Having jumped 1.7 percent on Wednesday and over 10 percent over the last two weeks, European shares opened down 0.4 percent as a mixed batch of company earnings gave investors an additional spur to cash in some of their recent gains. [.EU]

In the currency market, the euro also nudged back above $1.25 as a recent sharp rally in the dollar, particularly against the yen, came to a halt after volatile moves overnight.

But with markets having picked themselves up again after last month's beating, and political hurdles like the U.S. mid-term elections out of the way, there was a general feeling that the upward trend in stocks and the dollar would continue.

"The market feels great," said Nick Lawson Managing Director in Global Markets Equity at Deutsche Bank.

"It is a very risk-on mindset set at the moment and if you do get a much more inclusive tone from the ECB and some information on what assets could be bought, we could be off to the races."

Disappointing euro zone business surveys, a big cut in European Commission growth forecasts and the Bank of Japan's surprise decision last week to enhance its already massive monetary stimulus have raised pressure on the ECB to ease more.

The euro last traded at $1.2515, flirting once again with a two-year low of $1.2439 set early in the week, while demand for euro zone government bonds from Germany to Greece gradually picked up as trading gathered momentum. [GVD/EUR]

COMMODITY ROUT

In Asian trading, the region's shares and commodity currencies had stumbled as the ongoing rout in oil, copper, gold, silver and other key commodities trumped cautious optimism about a strengthening U.S. economy.

MSCI's broadest index of Asia-Pacific shares outside Japan fell as much as 0.5 percent before largely recovering, led by declines in Australia and China.

The Australian dollar, often used a liquid proxy for China, to which it is heavily exposed, flirted with Wednesday's four-year low of $0.8606 while the Canadian dollar stood near five-year lows of C$1.1466 to the U.S. dollar.

Many other commodity exporters took an even bigger hammering.

The Brazilian real remained within touching distance of a six-year trough hit last week and Russia's rouble tumbled to another record low a day after the central bank effectively abandoned daily inventions.

Reflecting the selloff, the MSCI's emerging market index is now at its cheapest level since 2005 in comparison to the U.S. S&P 500. Almost 30 percent of emerging markets are oil exporters and many others depend on mining or other commodities.

"While I would put about a 70 percent chance that the global economy will chug along, the fact that two of the BRICs bloc are facing problems does raise some caution," said Soichiro Monji, chief strategist at Daiwa SB Investments.

Japan's Nikkei ended down 0.9 percent as speculators booked profits from their 8-plus percent rise over the past three days, fueled by the BOJ's extra monetary stimulus.

That triggered a knee-jerk buyback in the yen, with the dollar falling to 114.55 yen after having hit a seven-year peak of 115.52 yen.

Still generally solid U.S. economic data and expectations of business-friendly policies following the Republican Party's election victory underpinned the dollar and saw record closing highs on Wednesday for the Dow and the S&P 500.

Payroll processor AD reported solid U.S. private-sector job growth in October, auguring well for jobs data due on Friday.

The strong dollar continued to weigh on commodities and metals though, sending the price of gold and silver to 4-1/2-year lows after big falls on Wednesday.

Copper, a barometer of global demand, eased 0.3 percent to $6,618.25 per tonne, while Brent oil, which has slumped 30 percent since June, remained near a four-year low at 82.70 a barrel.