* Shares climb as U.S. bank tests produce no big shocks
* Dollar slips slightly
* Markets seek positive surprise from U.S. employment data
By David Stamp
LONDON, May 8 (Reuters) - Shares climbed on Friday and the
dollar slipped slightly after stress tests on U.S. banks
produced no big shocks, but stocks sought a positive surprise
from U.S. employment data later to keep the rally going.
Crude prices climbed towards $58 a barrel, heading for
weekly gains of more than 8 percent on hopes that demand for oil
will revive. Longer-dated euro zone government bond prices fell
and the yield curve steepened after the European Central Bank
revealed steps to repair the banking system on Thursday.
Investors sighed with relief after U.S. regulators ordered
top banks to raise nearly $75 billion in capital, a sum which
analysts said was relatively modest, to help them to withstand
further shocks to the financial system. []
While the test results removed one major uncertainty from
the market on Thursday, U.S. payrolls data due at 1230 GMT
provided another.
TheMSCI world equity index <.MIWD00000PUS> was up 0.97
percent at 237.36 at 0846 GMT but the mood was not uniformly
confident across the globe. Asian shares lost steam on Friday,
although they remained up about 9 percent this week, bringing
gains since their 2009 low in early March to around 51 percent.
European shares climbed as traders hoped that a run of
better -- or at least less bad -- economic data would continue,
prolonging a strong recovery in stocks. The FTSEurofirst 300
index <> was up 1.19 percent to 861.53 at 0947 GMT. []
Investors were looking for signs of slowing U.S. job losses
to reinforce hopes that the end of the global recession is near,
and support the improved sentiment which has buoyed stock
markets and riskier currencies in the past two months.
LAST HURDLE?
"This (stress test result) could be seen by many as the last
hurdle for the markets to continue their stellar bull run," said
Chris Hossain, senior sales manager at ODL Securities. "Markets
tend to show where we should be in 18 months time, and for the
time being, a sense of optimism is in the air."
The Reuters consensus forecast is for 590,000 U.S. jobs lost
last month, a mild improvement from 663,000 slashed in March.
But the unemployment rate is seen at 8.9 percent, up from 8.5
percent the previous month. [] <ECON>.
The dollar slipped against a basket of currencies, as some
traders picked up the euro and sterling, currencies perceived to
hold higher risk.[]
"In previous months, it's always been how much worse the
payrolls will be. But this month the shoe is on the other foot
and people are hoping for a positive surprise," said Johan
Javeus, chief currency strategist at SEB Merchant Bank.
The dollar index <.DXY>, which tracks its movement against a
basket of currencies, slipped around 0.2 percent to 83.725.
The euro climbed as high as around $1.3432 in early European
trade, rising 0.2 percent on the day and recovering from a
session low of $1.3343.
NEXT WAVE
Mitul Kotecha, global head of FX strategy at Calyon in Hong
Kong, said that a smaller drop in the number of jobs lost would
support improved investor confidence. However, more was needed
to drive forward the recent rally in riskier major currencies.
"For the next wave of this rally to come through, you need
to see more fuel on the fire and that would mean more
significant improvements in data," Kotecha said.
Ten-year bond yields <EU10YT=RR> were 4.9 basis points
higher at 3.439 percent, while 2-year paper <EU2YT=RR>
outperformed with yields 5 basis points lower at 1.372 percent,
supported by ECB President Jean-Claude Trichet saying that
interest rates could fall further. []
The ECB cut rates a quarter percentage point on Thursday to
1.0 percent, and announced a series of unconventional measures
to drag down long-term borrowing costs in the euro zone.
U.S. Treasury debt prices rose as some investors hunted
bargains when bond prices fell after the poor results of a
30-year Treasury auction on Thursday. The benchmark 10-year note
<US10YT=RR> rose 7/32 in price to yield 3.321 percent, down 2.6
basis points from late U.S. trade on Thursday.
Oil extended gains as signs the global economy may have
reached bottom multiplied. U.S. light crude for June delivery
<CLc1> rose $1.02 to $57.73 a barrel by 0634 GMT, up 1.8 percent
after having settled up 37 cents at $56.71 a barrel on Thursday,
the highest settlement since Nov. 14.
(Reporting by Reuters bureaux; Editing by Ruth Pitchford)
