* World equity index set for highest close since May 2
* Commodity shares lead European stocks up
* Markets expect U.S. non-farm payroll increase of 164,000
* Euro soft after ECB's cautious economic outlook
* Brent crude sticks above $50 a barrel level
By Alistair Smout
LONDON, June 3 (Reuters) - World shares advanced towards their highest level in a month on Friday, although investor wariness over rising prospects of a near-term Federal Reserve rate hike subdued activity as traders awaited U.S. jobs data later in the day.
European shares followed Asia higher, with the STOXX Europe 600 .STOXX up 0.5 percent, boosted by a rebound in commododity-related shares as oil and copper prices both rallied.
The MSCI world equity index .MIWD00000PUS , which tracks shares in 45 countries, rose 0.2 percent to its highest level since the last day of May. A close at these levels would be its highest close since May 2.
Markets expect U.S. employment data due at 1230 GMT to show a non-farm payroll increase of about 164,000 and 0.2 percent rise in average wage earnings in May. ECONUS
The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15.
"Markets are mainly in a wait and see mode ahead of the U.S. jobs data, with the importance of the report rising more than usual this time as the Fed has indicated that it is considering a rate hike sooner rather than later," Philippe Gijsels, head of research at BNP Paribas (PA:BNPP) Fortis, said.
"A jobs figure outside the consensus has the potential to move stock markets quite violently."
Currently U.S. money market futures are pricing in only about 20 percent chance of a hike in June and 60 percent by July.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.5 percent, setting it up for a rise of 0.4 percent for the week. Japan's Nikkei .N225 closed up 0.5 percent, paring losses for the week to 1.1 percent.
Chinese shares recovered from a lacklustre start, with the CSI 300 index .CSI300 trading up 0.7 percent and the Shanghai Composite .SSEC climbing 0.4 percent, putting both on track for weekly gains of more than 4 percent.
In recent weeks global markets have been puzzling over what the Fed will do in the near term as relatively upbeat U.S. data have been eclipsed by a still-sluggish global economy and worries over the risk of Britain exiting the European Union.
"Nonfarms remain crucial but the Fed look confident that the labour market and current growth is strong enough to withstand a rate hike, nonetheless we will likely see a swing in the US dollar if figures miss significantly," Ana Thaker, Market Economist at PhillipCapital UK, said in a note.
"The Fed have been sending a hawkish message to markets for months... however, recently we have seen a change in market positioning with some doubts looking to creep in."
The dollar index, which tracks the greenback against a basket of six major peers, edged down 0.1 percent to 95.509.
The euro was little changed at $1.1146 on Friday EUR= , after sliding from this week's high of $1.1219 touched early on Thursday.
Against the yen, it last stood at 121.26 after falling to a three-year low of 121.01 yen EURJPY=R in the previous session, with investors left underwhelmed by a European Central Bank meeting on Thursday.
The ECB held monetary policy steady, and only nudged up its growth and inflation forecasts fractionally.
The yen rose to 108.790 per dollar, after hitting a two-week high of 108.5 JPY=EBS earlier in the session, a move some market players attributed to disappointment over a lack of a clear plan on stimulus from Japanese Prime Minister Shinzo Abe. It is poised for a gain of 1.6 percent for the week.
The yen tends to strengthen when there is bad news on the economy because it is often used as a funding currency for investment in higher-yielding riskier assets.
Oil prices were supported, with international benchmark Brent futures LCOc1 continuing to trade above the $50 a barrel level, near seven month highs, after the latest drawdown in U.S. crude stockpiles offset OPEC's failure to set a ceiling for its output.
Brent was up 0.2 percent at $50.14, headed for a rise of 1.7 percent for the week. It has rallied for four consecutive weeks, and is up 10.5 percent in that time.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 0.1 percent at $49.23 a barrel. It had tumbled more than $1 earlier in the week, and was flat for the week as a whole.
OPEC failed to agree on a clear oil-output strategy on Thursday as Iran insisted on steeply raising its own production, although Saudi Arabia's new oil minister promised not to flood the market and sought to mend fences within the organisation. CMCU3 rose 1 percent, bouncing back from falls this week. That helped the STOXX Europe basic resources sector .SXPP up 1.3 percent. Oil and gas shares .SXEP rose 1.2 percent
Gold is headed for its fifth consecutive weekly decline, weighed down by the uptick in risk appetite and shift of investments to equities.
Spot gold XAU= was little changed at 1,211.80 an ounce, around flat for the week.