* Oil falls on Chavez's Libya mediation proposal
* World stocks rise as oil dips
* Jobless claims boost US stocks
* ECB buoys euro with inflation comments
(Updates prices, adds quotes, details)
By Caroline Valetkevitch
NEW YORK, March 3 (Reuters) - U.S. stocks charged higher
on Thursday, driven by better-than-expected U.S. labor market
data and a pullback in oil prices, while the ECB president's
warning about inflation triggered a rally in the euro.
Data showing new U.S. claims for unemployment benefits
fell last week to their lowest level in more than 2-1/2 years
was the latest optimistic reading to bolster hopes for an
upside surprise in Friday's key payrolls report.
While European Central Bank President Jean-Claude
Trichet's comments on inflationary risks were widely expected,
he surprised investors by saying the bank may raise interest
rates as soon as next month.
World stocks as measured by the MSCI Index <.MIWD00000PUS>
rose 0.9 percent. On Wall Street, the Dow Jones industrial
average <> was up 179.10 points, or 1.5 percent.
The progressively stronger data "has got hopes up that we
are going to see better-looking non-farm payrolls numbers" in
the Labor Department data, said Scott Marcouiller, chief
technical market strategist at Wells Fargo Advisors in St.
Louis.
On Wednesday, ADP data showed U.S. private-sector
employers added more jobs than expected last month. The Labor
Department's closely watched monthly payrolls report for
February is due on Friday.
OIL AND GOLD SLIP
Oil prices declined after Venezuela President Hugo Chavez
made a proposal to try to broker a peace deal in Libya.
Some oil analysts suggested the Chavez proposal was a
convenient excuse for traders to adjust their positions.
"If it's coming out of Chavez, it might not have a great
degree of substance," said Tim Riddell, head of technical
analysis at ANZ in Singapore.
"The fact that the markets have been so volatile, and
without having concrete evidence of any material shift in the
unrest in the Arab world, suggests to me that we are at best
consolidating."
Brent crude oil <LCOc1> was down $1.86 at $114.49 a
barrel. On Wednesday, crude approached 2-1/2-year highs as
violence escalated in oil producer Libya.
Investors worry that if it is not soon halted, political
instability could spread to major oil producer Saudi Arabia, a
central U.S. ally in the region, and other oil suppliers.
Rising prices for oil and other commodities are pushing up
prices for goods around the world, causing the heightened
concern about inflation risks.
The latest batch of purchasing managers' indexes (PMI) in
Europe and elsewhere again pointed to fast-building
inflationary pressures, with Europe's private sector surging
at its fastest pace in almost five years in February. For
details, see []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global and euro zone services PMI graphic:
http://r.reuters.com/vax38r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro pierced resistance around $1.3958, its 200-week
moving average, to hit as high as $1.3976 <EUR=EBS>, its
strongest since Nov. 8, and on track to test the
psychologically important $1.40 level.
Gold prices fell on Trichet's comment. Spot gold <XAU=>,
which hit a record high this week, dropped as low as $1,417.22
an ounce.
Trichet said the ECB will exercise "strong vigilance" over
rising inflation. For Trichet's comments see [].
In the U.S. stock market, the Dow Jones industrial average
<> was up 179.10 points, or 1.48 percent, at 12,245.90.
The Standard & Poor's 500 Index <.SPX> was up 20.00 points, or
1.53 percent, at 1,328.44. The Nasdaq Composite Index <>
was up 51.67 points, or 1.88 percent, at 2,799.73.
As stocks rose, U.S. bonds fell. The benchmark 10-year
note <US10YT=RR> was down 23/32, its yield rising to 3.56
percent from 3.47 percent on Wednesday, after the jobless
claims data.
(Reporting and writing by Caroline Valetkevitch; Additional
reporting by Wanfeng Zhou, Ellen Freilich and Edward Krudy in
New York; Jeremy Gaunt, Caroline Copley, Neal Armstrong and
Simon Falush in London; Editing by Jan Paschal)
