World stocks kicked off October on a weaker note on Thursday as caution over the state of the US recovery tempered anticipation the global economy would gather momentum in the final three months of 2009.

The euro was the biggest loser in the currency market after EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the Eurogroup would discuss its strength.

European stocks erased early gains to stand down 0.5 per cent, having posted the best quarterly performance in nearly 10 years in the three months to September.

Investors were reluctant to buy or sell aggressively ahead of a closely-watched US jobs report on Friday. Data on Wednesday showed a surprising contraction in an index of US Midwest business activity.

"I don't think anyone will sell too aggressively ahead of the (US) September employment report tomorrow," said Bernard McAlinden, investment strategist at NCB Stockbrokers.

"The economic data hasn't been bad. House prices have been firm ... I think we're in the early stages of a new cycle and indices can go higher over the next year or so though the pace at which this rally can continue is questionable."

MSCI world equity index fell 0.1 per cent, having risen more than 17 per cent in the third quarter.

"My sentiment is that we came through September in fairly decent shape and I think we're going to press on and it won't be too bad; I think it'll be quite a good fourth quarter," said Stephen Pope, chief global market strategist at Cantor Fitzgerald.

Emerging stocks rose 0.3 per cent.

US crude oil fell 0.7 per cent to $70.11 a barrel, weighed by concerns over rising stocks and weak demand.

The dollar rose 0.5 per cent against a basket of major currencies, as investors adjusted positions ahead of a meeting of Group of Seven finance chiefs in Istanbul this weekend. The euro fell 0.6 per cent to $1.4546.

"If the weaker dollar trend continues, it will be a concern for a lot of policymakers," said Daragh Maher, senior currency strategist at Calyon.

The September Bund future fell 6 ticks. (Reuters)