* U.S. jobs data, ECB rate hikes in focus
* Oil higher, equities gain
By Jeremy Gaunt, European Investment Correspondent
LONDON, March 4 (Reuters) - Hopes of an improved U.S.
employment picture lifted shares on Friday, but the prospect of
higher interest rates in Europe and a rising oil price kept
other world markets on edge.
The focus for the day was on the U.S. jobless report to be
released later, with analysts expecting employers to have hired
more workers in February than in any month since May last year.
That would feed into the widespread belief that the U.S.
economy is in recovery mode and that the improvement should soon
trickle down into lagging consumer sentiment.
At the same time, however, improved global growth is raising
inflation pressures, particularly threatening at the moment with
Middle East and North African political turmoil driving oil
prices to levels that could hurt recovery.
Brent crude futures for April delivery <LCOc1> were up $1.41
to $116.20 a barrel on Friday.
The prospect of higher inflation prompted the European
Central Bank on Thursday to indicate it could raise interest
rates as soon as next month, a hawkishness that stunned many in
the market.
Stock markets were nonetheless relatively buoyant on Friday,
lifted by economic optimism even if a number of market
participants said it was a tenuous stance.
"Any shortfall in the U.S. non-farm payrolls, or any
flare-ups on the geopolitical front could see the risk appetite
ebbing away once again," said Chris Weston, institutional trader
at IG Markets.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.4
percent, taking the index up nearly 1.5 percent for a highly
volatile week.
The FTSEurofirst 300 <> was up 0.6 percent and Japan's
Nikkei <> gained 1 percent.
EURO BOOST
The euro traded near a four-month high against the dollar,
held there by the competing push-pull of higher euro zone
interest rates and a stronger U.S. economy.
"We should see better non-farm payrolls figures, but if U.S.
yields don't rise, it won't help the dollar," said Marcus
Hettinger, global FX strategist at Credit Suisse in Zurich.
"Interest rate differentials ... are playing in favour of
the euro, so we could see a break above $1.40 any time now."
ECB rate rise speculation has expanded the yield spread
between two-year German <DE2YT=TWEB> and U.S. government debt
<US2YT=RR>, the most sensitive maturity to official rate moves,
to around 1.0 percent, its widest since January 2009.
The euro <EUR=> was flat on the day at $1.3950. The dollar
was flat against a basket of currencies <.DXY>.
The euro zone bond market was little changed ahead of the
jobs data and following a sell off on Thursday.
(Additional reporting by Naomi Tajitsu and Harpreet Bhal;
editing by Patrick Graham)
