* U.S. jobs data grim but not as bad as some feared
* Wall Street, European shares gain; Japan loses 3.6 pct
* South Korea joins rate cut parade
* Dollar index weaker
(Updates with U.S. markets, changes byline, dateline, previous
LONDON)
By Burton Frierson
NEW YORK, Nov 7 (Reuters) - Wall Street and European shares
rallied on Friday as investors were relieved that U.S. jobs
figures did not live up to pessimists' worst fears after a
deluge of horrific economic reports this week.
U.S. employers slashed an unexpectedly steep 240,000 jobs
in October but financial markets had braced for a much worse
outcome in the days before the release of the data. To read
more on the payrolls data double-click on [].
Bargain hunters stepped in to buy beaten-down stocks after
the report and equities' exuberance pummeled government bonds,
which generally benefit more from weak economic news.
The prices of oil, which is sensitive to economic growth
prospects, overcame losses to rise back above $61 a barrel
<CLc1> and gold also gained, both of which were helped by a
broadly softer U.S. dollar.
Still, few found much reason for encouragement in the data,
which showed the world's largest economy shed many more jobs
than previously estimated during August and September, lifting
the total cuts to 1.2 million so far this year.
"I think the numbers are weak across the board but I think
they were well anticipated," said Thomas di Galoma, head of
U.S. Treasury trading at Jefferies & Co in New York, adding:
"It needed to be down 350,000 to really get the market
rolling."
The Dow Jones industrial average <> was up 161.29
points, or 1.85 percent, at 8,857.08. The Standard & Poor's 500
Index <.SPX> was up 16.57 points, or 1.83 percent, at 921.45.
The Nasdaq Composite Index <> was up 31.99 points, or 1.99
percent, at 1,640.69.
The pan-European FTSEurofirst 300 <> rose 2 percent.
Earlier, however, Japan's Nikkei average <> dropped 3.6
percent.
VOLATILE
Markets have been volatile as the world's developed
economies head for their first full-year contraction since
World War Two. Central banks have slashed interest rates to
shore up deteriorating economies. The Bank of Korea cut for the
third time in a month on Friday, a day after half-point cuts by
the European Central Bank and the Swiss National Bank.
The Bank of England chopped its key rate 1.5 percentage
points on Thursday, much more than the market expected, taking
British borrowing costs to the lowest since the 1950s.
Industry surveys this week showed U.S. manufacturing
suffered its worst slump in 26 years and a key gauge of the
service sector posted the lowest reading in its 11 years.
Those reports also indicated a sharp deterioration in
employment and were accompanied by corroborating evidence, with
U.S. private employers making their deepest job cuts in six
years last month and companies' planned layoffs surging to the
highest in nearly five years.
The reports were further evidence that the United States is
in the grips of the worst financial crisis in 80 years, which
has spread its debilitating economic effects around the globe
at an increasingly rapid rate in recent months.
It all started with this decade's boom and bust in the U.S.
housing market, and there was further evidence of problems in
this sector on Friday.
Pending sales of existing U.S. homes fell in September on
tighter credit and worsening economic conditions, according to
the National Association of Realtors. [].
RELIEF REIGNS
Still, Wall Street's relief rally reigned supreme on
Friday, sending government bonds lower.
"Treasuries were priced for Armageddon and we didn't get
Armageddon," said Kevin Flanagan, a fixed income strategist at
Morgan Stanley's wealth management arm in Purchase, New York.
"There is no doubt we are seeing deteriorating labor
market conditions but for those expecting down 300,000 the
report didn't quite measure up today."
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 24/32, with the yield at 3.78 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 4/32, with the yield at 1.34
percent.
The dollar was down against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.11 percent at 85.799 from a previous close of 85.893.
The euro <EUR=> was up 0.47 percent at $1.2760 from a
previous session close of $1.2700.
In energy and commodities prices, U.S. light sweet crude
oil rose 83 cents, or 1.37 percent, to $61.60 per barrel, and
gold <XAU=> rose $1.40, or 0.19 percent, to $733.90.
(Reporting by Reuters bureaus in Asia, Europe and the
Americas; Writing by Burton Frierson; Editing by James
Dalgleish)
