* Wall Street rallies on banking shares, U.S. jobs data
* Dollar dips to 6-week low vs euro as risk appetite gains
* Oil gains on rising expectations of economic recovery
* Bonds rise on lingering worries over post-payrolls data
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, May 8 (Reuters) - Global stocks and crude oil
rose on Friday after U.S. jobs data and the long-awaited stress
tests on U.S. banks were better than expected, adding to
growing optimism that a slumping U.S. economy is improving.
The surge in equity markets pushed major indexes further
into positive territory for the year, with MSCI's all-country
index <.MIWD00000PUS> now up 6.4 percent so far in 2009.
The dollar slipped against the yen and the euro, which
surged to a six-week high above $1.36 as the news from the
labor market dried up safe-haven flows into the U.S. currency.
Oil rose more than 3 percent to settle above $58 a barrel,
close to a six-month high, after data showed U.S. employers cut
539,000 jobs in April -- below the March tally of 663,000 job
losses and consensus expectations of 590,000.
"Crude futures are higher because people think the sky is
no longer falling," said Mark Waggoner, president of Excel
Futures in Huntington Beach, California.
"From the middle of the week we've seen positive numbers on
jobs -- private sector jobs, jobless benefit claims and now
smaller than expected job losses last month," he said.
U.S. and European stocks rose as financials gained after
the results of bank stress tests were widely seen as not as bad
as expected. Equity markets were helped by energy shares that
rose on the back of stronger crude prices.
Several large U.S. banks announced equity and debt
offerings to raise their capital levels after the stress test
results were released late Thursday.
The results have "given people a little bit of confidence
that the government can help to solve this part of the
financial crisis," said Richard Sparks, senior equities analyst
and options trader at Schaeffer's Investment Research in
Cincinnati.
"There's a sense that the government actually has a logical
plan, (that they) are holding the companies to a certain
standard (so) even if things got worse, these companies will be
able to survive. That helps bolster confidence in the
administration."
Shares of major banks rose, with JPMorgan Chase Inc <JPM.N>
and Wells Fargo & Co each rising more than 10 percent.
Citigroup Inc <C.N> rose 5.5 percent and Bank of America Corp
<BAC.N> 4.9 percent.
The KBW Bank index <.BKX> jumped 12.1 percent.
The Dow Jones industrial average <> gained 164.80
points, or 1.96 percent, to close unofficially at 8,574.65. The
Standard & Poor's 500 Index <.SPX> added 21.84 points, or 2.41
percent, to 929.23. The Nasdaq Composite Index <> rose
22.76 points, or 1.33 percent, to 1,739.
For the week, the Dow rose 4.4 percent, the S&P 500 5.9
percent and the Nasdaq 1.2 percent. While the S&P and Nasdaq
are positive for the year, the Dow is still lower.
The dollar weakened as it tends to suffer when risk
aversion ebbs and investors feel they no longer need to buy it
as a safe haven.
The dollar also fell to a four-month low against a basket
of major currencies, with the U.S. Dollar Index <.DXY> off 1.7
percent at 82.457.
The euro <EUR=> gained 1.72 percent at $1.3629. Against the
yen, the dollar <JPY=> fell 0.85 percent at 98.40.
"The market is positioning for recovery over the next few
months, which means the dollar will clearly see considerable
weakness as this plays out," said Melvin Harris, chief market
strategist at Advanced Currency Markets in New York.
"The jobs data was encouraging, and any trader would tell
you they've expected to see unemployment at 9 to 10 percent
before this thing was over, so that's not a shock," he said.
Although the drop in U.S. payrolls was less than expected,
the news failed to dispel the likelihood of heavy job losses in
the months ahead, pushing government debt prices higher.
The jobs report included a few discouraging signs, such as
a spike in the U.S. unemployment rate to 8.9 percent -- the
highest since September 1983 -- helping spur a flight-to-safety
bid in U.S. government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
14/32 in price to yield 3.29 percent. The 2-year U.S. Treasury
note <US2YT=RR> added 1/32 in price to yield 0.98 percent.
U.S. crude <CLc1> gained $1.92 to settle at $58.63.
New York gold futures ended lower as the improving economic
sentiment prompted investors to take profits after a recent
sharp rally.
Gold for June delivery <GCM9> settled down 60 cents at
$914.90 an ounce in New York.
A rally in economically sensitive copper stalled after
prices neared key technical levels. Copper, used extensively in
construction, has doubled in value since the start of 2009.
Copper for July delivery <HGN9> eased 1.90 cents to close
at $2.1455 a pound in New York.
"We don't have any actual improvement in demand yet, but
clearly there is optimism right through the financial markets."
said Stephen Briggs, a metals strategist at RBS Global Banking
and Markets.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> rose 0.4 percent and Japan's Nikkei average
<> rose 0.5 percent to notch a new six-month close.
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog click on http://blogs.reuters.com/hedgehub)
