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Steps taken in the past month, including outright price controls to curb speculation and monetary tightening, had started to produce results, he said.

Central bank the People's Bank of China raised interest rates on Saturday for a second time in just over two months as Beijing strengthened its battle against the stubbornly high inflation.

"We have raised reserve requirement ratio for six consecutive times and increased interest rates twice to absorb excess liquidity in the market to keep it at a reasonable level to support economic development," Wen said in a state radio broadcast a day after the rate rise.

"I believe we can keep prices at a reasonable level through our efforts. As a major leader of the government, I have the responsibility and I have the confidence, too," he said in remarks published on www.cnr.cn.

The central bank said on Friday it would deploy a range of measures to head off inflationary pressures and asset bubbles.

China intensified its property tightening measures in April and September in an attempt to brake soaring property prices.

"Until now, the measures are not implemented well enough, and we will reinforce our efforts in two ways," Wen said.

The government plans to build 10 million units of affordable housing in 2011, up from this year's target of 5.8 million.

China will also increase efforts to curb speculation in the real estate market, mainly through monetary policies and stricter use of land, Wen said, without giving details.

Property transactions as well as land costs, a major contributor to high housing prices, have shown signs of a rebound in recent weeks, triggering concerns of more tightening.

Despite all the challenges, Wen said: "I believe property prices will return to reasonable levels through our efforts. I have the confidence."

(Editing by Daniel Magnowski)

Thursday's U.S. data showing that demand for a range of long-lasting U.S. manufactured goods surged in November and consumer spending rose for a fifth straight month reinforced expectations for strong economic growth in the fourth quarter.

"We've had a good run, helped by quantitative easing and better economic data," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin. "We've broken out of ranges, and it can go higher in 2011."

The MSCI world equity index .MIWD00000PUS edged higher to just below Thursday's peak, which was its highest since September 2008, set just before the collapse of Lehman Brothers.

The index is up 9.6 percent this year.

Fund tracker EPFR said investor focus shifted from bonds to equities in the final weeks of 2010, with equity funds globally taking in a net $4.5 billion for the week ending December 22. Bond funds saw redemptions totaling $2.3 billion.

The Thomson Reuters global stock index .TRXFLDGLPU dipped slightly, but the FTSEurofirst 300 index .FTEU3 rose about 0.1 percent.

Ratings agency Fitch downgraded Portugal on Thursday, citing burgeoning debt levels and a tough financing environment, a move analysts said was largely expected by investors.

The downgrade puts Fitch's rating for Portugal on a par with Moody's A1 rating, but still two notches above that of Standard and Poor's A-minus.

Trading was very light, with markets closed in Germany, Italy, Spain, Denmark, Finland, Norway, Sweden, Switzerland, Greece, Austria, Hungary, and Iceland. U.S. markets were also closed to observe the Christmas holiday.

Emerging market stocks .MSCIEF fell slightly.

U.S. crude oil rose more than 1 percent to $91.41 a barrel as unusually cold weather fueled demand and depleted supplies.

Snow and more frigid temperatures were predicted in parts of Europe over the weekend, threatening to prolong chaos at airlines and rail networks and further boost fuel demand.

The bund future fell 32 ticks.

The U.S. dollar .DXY fell less than 0.1 percent against a basket of major currencies, while the euro was mostly unchanged at $1.3114.

(Additional reporting by Padraic Cassidy)

Analysts have said oil producing countries are likely to raise output after crude rallied more than 30 percent from a low in May because they fear prices could damage economic growth in fuel importing countries.

European benchmark ICE Brent crude for February closed at $93.46 on Friday after hitting $94.74 a barrel, its highest level since October 2008.

Arab oil exporters meeting in Cairo this weekend said they saw no need to supply more crude as stocks were high and prices had been inflated temporarily by cold weather in Europe.

Asked by Reuters if the world economy could stand a $100 oil price, Kuwaiti Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said: "Yes it can."

Iraq's new oil minister and the head of Libya's National Oil Corporation both told Reuters that $100 was a fair price, while Qatar's Minister Abdullah al-Attiyah said he did not expect OPEC to increase production in 2011.

"I do not expect an OPEC meeting before June because oil prices are stable," he said.

Some delegates even called for exporters to comply better with agreed production limits. OPEC members' compliance with promised cutbacks reached 56 percent in November, according to Reuters estimates.

When asked if output could be raised, Kuwait's Sheikh Ahmad said: "No. More compliance, more compliance."

MARKET "WELL SUPPLIED"

The Cairo meeting of the Organization of Arab Exporting Countries (OAPEC) brought together Arab members of OPEC including top exporter Saudi Arabia, which has traditionally been viewed as a price moderate, as well as non-OPEC countries Tunisia, Egypt, Syria and Bahrain.

OPEC cut output drastically after the global financial crisis struck in 2008 to prop up collapsing oil prices.

As demand has risen steeply in 2010 and is expected to rise further in 2011, the market is watching closely whether OPEC can release at least some of its spare capacity to prevent prices from soaring to around $150 per barrel as they did before the crisis struck in summer 2008.

OPEC's most influential oil minister, Saudi Arabia's Ali al-Naimi, said on Friday he was still happy with an oil price of $70-80 a barrel and there was no need for an extra OPEC meeting before the next scheduled one in June.

Others in the group have been pressing for a higher price, arguing that quantitative easing and a weakened U.S. dollar that spurred gains across financial markets mean the oil price strength is partly nominal.

The People's Bank of China said it would increase the benchmark lending rate by 25 basis points to 5.81 percent and raise the benchmark deposit rate also by 25 basis points to 2.75 percent.

The central bank said in a statement on its website (www.pbc.gov.cn) that the latest rate rise would take effect on Sunday.

Annual Chinese consumer price inflation raced to a 28-month high of 5.1 percent in November, in part due to excess cash in the economy that is driving prices higher.

While almost all investors and analysts thought more tightening was coming, there was uncertainty about whether the central bank would raise rates before the end of the year.

The move came after Beijing said early in December it was switching to a "prudent" monetary policy, from its earlier "moderately loose" stance.

Analysts said the change of wording could pave the way for more interest rate increases and lending controls.

Chinese stock markets have shed nearly 10 percent since mid-November on concerns the government would ratchet up its monetary policy tightening in face of rising inflation.

To tame price pressures, China raised interest rates on Oct 19 for the first time in nearly three years. The consensus of analysts polled by Reuters this month was for three rate rises of 25 basis points each by the end of next year.

Along with playing a key role in the fight against inflation, policy tightening also signals the government's confidence that the world's second-largest economy is on solid ground, even as the U.S. and European recoveries remain fragile.

China has also officially increased banks' required reserve requirements six times this year and restricted lending by them.

In addition, Beijing has taken a slew of steps to cool the property sector, trying to ward off a potential asset bubble.

(Reporting by Ben Blanchard and Niu Shuping; Editing by Mike Nesbit)