*Weaker US jobs report deadens equities rally
*MSCI world stock index hangs onto gain
*Consumer spending seen buoying economy
(Updates with European markets' close)
By Al Yoon
NEW YORK, Dec 3 (Reuters) - The U.S. dollar fell and
stocks' rally stalled on Friday after the U.S. unemployment
rate rose last month, but investors latched onto a larger trend
of economic strength and resisted heavier selling.
Gold <XAU=> jumped above $1,400 an ounce on Friday, headed
for its biggest weekly gain since April after the jobs data
sent the dollar tumbling 1 percent.
Some investors shifted away from riskier assets, lifting
prices of U.S. Treasury securities.
Stock in Europe ended slightly lower, but analysts
predicted the overall trend is for European markets to push
higher despite the disappointing U.S. payrolls figure.
"Every other economic data point has been constructive,"
said Phil Orlando, chief equity market strategist, at Federated
Investors, in New York.
Wall Street's rally paused after the Labor Department said
U.S. businesses added 39,000 nonfarm payrolls in November,
falling short of the 140,000 expected by economists. The
unemployment rate rose to a seven-month high of 9.8 percent.
For details see, []
Overall employment for September and October was revised
upward to show 38,000 more jobs created than previously
estimated.
Other indicators have raised optimism about the economy.
Retailers this week reported much stronger-than-expected
year-over-year sales in November.
"The market is reading through the weak jobs report to
Washington and they are drawing two conclusions -- the Fed is
not going to be able to abandon quantitative easing in the face
of this weak jobs number and if Congress thought they could
begin to raise taxes at this point in the fragility of the
economic cycle they are sadly mistaken," Orlando said.
Separately Friday, reports showed the U.S. services sector
grew for an 11th straight month in November and new factory
orders fell. [] [].
The Dow Jones industrial average <> fell 24.18 points,
or 0.21 percent, to 11,338.23. The Standard & Poor's 500 Index
<.SPX> declined 3.35 points, or 0.27 percent, to 1,218.18 and
the Nasdaq Composite Index <> inched higher by 0.66 points
to 2,580.01.
The European benchmark FTSEurofirst 300 <> share
index declined 0.2 percent to 1,103.97. In Asia trading, the
Nikkei <> closed 0.1 percent higher.
The MSCI world equity index <.MIWD00000PUS> managed a 0.54
percent gain to reach its highest since Nov. 12.
Many analysts viewed the disappointing employment report as
an outlier amid a slew of generally positive U.S. data released
over the last few weeks that suggest traction for the economy.
Strong holiday spending, including all-time highs for online
sales on so-called Cyber Monday have made investors more
optimistic about year-end.
"If people who are employed are spending money, the
unemployment rate is not going to be as important," said
Charles Day, a financial adviser at Morgan Stanley Smith Barney
in Purchase, New York.
"The mind-set people are in right now is to look for good
news, and the good news of what's happened over the last two
days of the economy turning is overshadowing bad news.
Investors are looking for reasons to be in the market."
For the dollar, however, the U.S. jobs report injected
enough caution to create a fresh downdraft on the currency.
The euro-zone debt crisis is expected keep the euro under
pressure for some time. European authorities may have bailed
out Ireland, but investors are speculating euro-zone nations
such as Spain and Portugal will require assistance.
The dollar fell against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> down 1.13 percent
at 79.397. The euro <EUR=> gained 1.1 percent to $1.3370.
Against the Japanese yen, the dollar <JPY=> slumped 1.36
percent to 82.73 yen.
U.S. Treasury prices jumped as traders unwound short
positions after the payrolls data, and others saw softer U.S.
growth supporting lower interest rate policy.
The benchmark 10-year Treasury yield declined 0.03
percentage point -- from its highest level since July -- to
2.97 percent.
European shares and the euro drew support among chatter
that the European Central Bank was in the market for bonds from
euro-zone nations in danger of rising borrowing costs and in
possible need of bailouts.
Portugal's five-year credit default swaps tightened further
by midday to 409 basis points from 448 basis points, data from
Markit showed, while the premium paid for 10-year Portuguese
debt <PT10YT=TWEB> over German bunds <DE10YT=TWEB> declined.
In commodities, U.S. light sweet crude oil <CLc1> rose 36
cents, or 0.41 percent, to $88.36 per barrel.
(Additional reporting by Rodrigo Campos and Gertrude
Chavez-Dreyfuss in New York, and Simon Jessop in London;
Editing by Kenneth Barry)
