European and Japanese stocks crept higher on Tuesday while bond prices slipped and the dollar clung to recent gains as investors awaited Friday?s US jobs data for a guide to 2005?s prospects.

US stocks began the new year on Monday on a weak note, slipping after disappointing indications on employment and construction spending.

Investors are generally expecting the pace of world economic growth to ease somewhat in 2005, but to be robust enough to allow stocks to make modest gains.

?While somewhat slower than in 2004, US and global economic growth should continue at a respectable pace in 2005?, Bob Doll, chief investment officer of Merrill Lynch Investment Managers said in a New Year outlook.

The end-of-week jobs data will provide a signpost. US non-farm payrolls are expected to rise 175,000 in December, up from November?s weak gain of 112,000, according to the median forecast of a Reuters poll.

Despite the US stock losses on Monday, equities were generally higher on Tuesday.

European shares hovered near 2-1/2 year highs as economic optimism prevailed, despite a bigger-than-expected rise in German unemployment and a downward revision in French third-quarter GDP numbers.

?Investors have cash ready to be put to work and they think the worst of the economic data is now behind us?, Nigel Cobby, managing director of European Equities at JP Morgan.

The FTSEurofirst 300 index of pan-European blue chips was 0.1 percent higher, having hit its highest level since July 10, 2002 on Monday. The DJ Euro Stoxx 50 was a tad lower.

Earlier, Japan?s Nikkei average ended up 0.25 percent, or 28.99 points at 11,517.75, its highest finish since July 13. The broader TOPIX index gained 0.33 percent to 1,153.38.

<B>Dollar and bonds</B>

The dollar hovered above recent record lows against the euro.

?Further consolidation is likely, though it?s unlikely to mark a change in trend,? said Mitul Kotecha, head of global foreign exchange research at Calyon. ?We had some fairly sharp moves amid thin liquidity so it?s unsurprising we?ve seen a bit of profit-taking and a bit of a bounce back.?

The euro was quoted at $1.3360, three-quarters of a percent down from late New York levels.

The dollar was up nearly 1 percent on the day against the Japanese currency at 103.68 yen.

Euro zone government bond yields edged higher with the market drifting.

The two-year Schatz yield was up 3.2 basis points at 2.49 percent. The 10-year Bund yield was up 3.3 basis points at 3.663 percent.

Oil prices steadied after a sharp drop on Monday on continued mild winter weather in the United States, with US crude hovering just above $ 42 a barrel.