* Risk assets rally on jobs report, falter on other data
* Dollar rallies versus yen after U.S. jobs data
* U.S. bonds fall sharply, then pare losses on ISM report
* Oil flip-flops, falls after services sector news
(Updates with close of European markets)
By Herbert Lash
NEW YORK, Sept 3 (Reuters) - Stocks jumped and commodities
rallied on Friday after data showed U.S. job losses were less
than expected in August, the second major report this week to
ease fears the American economy may slip back into recession.
The price of government debt on both sides of the Atlantic
fell as the report on the U.S. labor market offered fresh
evidence that a double-dip recession may not be in the works.
Recent poor data had strongly suggested a double dip might be
ahead. For details see [] []
Private payrolls growth surprised on the upside, and U.S.
employment declined far less than expected, confounding the
market's gloomy prognosis in recent weeks on the U.S. economy.
"We're not growing very fast, but it doesn't suggest the
situation is continuing to deteriorate," said Nigel Gault,
chief U.S. economist at IHS Global Insight in Lexington,
Massachusetts.
"It's not a great report, but it's a bit better than
expected, and it does not indicate that we're into some sort of
headlong plunge into a double dip," Gault said.
Risky assets pared gains after a report on the U.S.
non-manufacturing sector grew below expectations in August,
even though it expanded for an eighth straight month.
Copper prices hit a fresh four-month high and silver
climbed to its highest since March 2008 on the improved outlook
for economic growth.
European shares hit a three-week closing high and the
benchmark S&P 500 index was close to posting its biggest weekly
gain in almost two months.
MSCI's all-country world index <.MIWD00000PUS> was up 0.9
percent and about 3.6 percent for the week -- its biggest
weekly gain since the week ended July 11.
The Dow Jones industrial average <> was up 71.68
points, or 0.69 percent, at 10,391.78. The Standard & Poor's
500 Index <.SPX> was up 8.56 points, or 0.79 percent, at
1,098.66. The Nasdaq Composite Index <> was up 19.81
points, or 0.90 percent, at 2,219.82.
While investors' appetite for risk rose on the payrolls
report, data on national services by The Institute for Supply
Management provided a mixed outlook for the economy.
"What we're seeing here is that the recovery continues to
bounce around. This supports our view that we're going to see a
below-average recovery, though the jobs data earlier today made
the case for a double-dip harder to make," said Channing Smith,
vice president of Capital Advisors in Tulsa, Oklahoma.
Crude oil retreated after briefly rising on the jobs
report, and gold prices curbed losses of more than 1 percent to
trade lower on the services sector data.
U.S. light sweet crude oil <CLc1> fell $1.31 to $73.71 a
barrel.
Debt prices fell.
The benchmark 10-year Treasury note <US10YT=RR>, down a
full point earlier in the session, fell 24/32 in price to yield
2.71 percent after the ISM report.
September Bund futures <FGBLc1> settled at 132.0, down 72
ticks on the day. []
The U.S. dollar fell against the euro and commodity
currencies after the jobs data boosted the appetite for riskier
assets. []
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.44 percent at 82.097.
The euro <EUR=> was up 0.48 percent at $1.2887, and against
the Japanese yen, the dollar <JPY=> was up 0.24 percent at
84.49.
Oil prices edged into positive territory on the jobs
report, then pared gains to turn lower after the services
sector data.
U.S. light sweet crude oil <CLc1> fell $1.31 to $73.71 a
barrel. Spot gold prices <XAU=> fell 55 cents to $1,250.20 an
ounce.
Asian stocks edged higher before the job report, with
MSCI's regional stock index outside Japan <.MIAPJ0000PUS> up
0.3 percent. Japan's Nikkei <> rose 0.6 percent, but was
still down more than 13 percent for the year.
(Reporting by Wanfeng Zhou, Ellen Freilich in New York;
Kirsten Donovan, Atul Prakash and Jan Harvey in London; Writing
by Herbert Lash; Editing by Kenneth Barry)
