By Veronica Brown

The stress that has scrambled markets for so long remained on radars, though, as a rare positive U.S. housing figure had no impact on European credit markets, allowing indexes to widen, while sterling dropped after Britain's unemployment rate spiked.

U.S. Treasury prices firmed slightly, while the dollar also rose a touch <.DXY> as attention turned to the Federal Reserve's policy outcome later in the day, and speculation over whether it will purchase government debt to keep interest rates low.

World stocks, as measured by MSCI's all country index rose 0.3 percent to 195.59 <.MIWD00000PUS>.

European financials gained, with UniCredit up 7.4 percent early, after the company posted a 38 percent fall in 2008 net profit on Wednesday, ahead of analysts' forecasts.

A lot of the impetus came after figures on Tuesday showing a 22.2 percent surge in U.S. housing starts in February.

But analysts were sanguine on the recent purple patch for stocks, wary of several false starts ahead of further economic bad news.

"This is a correction but we're not going to go up every day, one swallow does not make a summer," said Howard Wheeldon, strategist at BGC markets.

That sense of caution was mirrored in European credit markets.

The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 1138 basis points at 0929 GMT (5:29 a.m. EDT), according to data from Markit, 33 basis points wider versus late on Tuesday.

The investment-grade Markit iTraxx Europe index was at 191.25 basis points, 3.25 basis points wider.

FED WATCH

Leading central banks are taking or contemplating a range of unconventional measures to maintain borrowing costs at an ultra-low level as they bid to drag economies out of a deep global downturn.

The Swiss National Bank has combined a rate cut with FX and bond market intervention, the Bank of England has started purchasing government debt with freshly created money, while the Bank of Japan has just sharply increased the level of debt it will buy to support the economy.

But the Fed is probably going to hold fire on plans to buy long-dated debt, analysts say, hoping that stimulus packages implemented so far will kick in soon.

"Expectations (that the Fed will announce a move toward buying U.S. government debt) have increased after the BoJ decision, but I think they may be disappointed," said Antje Prafcke at Commerzbank in Frankfurt.

The BOJ said overnight it was holding interest rates steady at 0.1 percent and increasing its outright buying of Japanese government bonds to 1.8 trillion yen ($18.28 billion) per month from 1.4 trillion yen.

On currency markets, the dollar was up a quarter percent against a basket of major currencies <.DXY>, while sterling dived to a 7-week low against the euro at 93.96 pence after data showing Britain's jobless rose above 2 million.

(Additional reporting by Simon Falush and Jane Baird in London Editing by Patrick Graham)