U.S. dollar, stocks rally on strong U.S. jobs data

By Herbert Lash

NEW YORK (Reuters) - The U.S. dollar climbed more than 1.0 percent against the yen and global equity markets surged on Friday, boosted by a U.S. labor report showing stronger-than-expected jobs growth in April.

Wall Street stocks surged to record highs, while government debt prices dropped.

U.S. nonfarm payrolls rose 165,000 last month and the jobless rate fell to a four-year low of 7.5 percent, the Labor Department said. Economists expected payrolls to rise 145,000 and the unemployment rate to hold steady at 7.6 percent.

Wall Street and most European indices rallied more than 1 percent on the news of the resilient U.S. labor market. The drop in the jobless rate reflected a gain in employment, rather than people leaving the workforce.

The benchmark S&P 500 stock index broke through the 1,600 mark for the first time, and the Dow surpassed the 15,000 mark, also for the first time, as both indices set record highs.

Crude oil, copper and other commodities' prices also rallied, while government debt slumped on the data.

The strong jobs data overshadowed an industry report that showed the pace of growth in the vast U.S. services sector slowed in April to its weakest pace in nine months.

"The employment number was definitely the trigger for today's rally," said Michael Korn, president at Skokie Energy in Princeton, New Jersey.

The Dow Jones industrial average was up 163.13 points, or 1.10 percent, at 14,994.71. The Standard & Poor's 500 Index was up 19.53 points, or 1.22 percent, at 1,617.12. The Nasdaq Composite Index was up 43.57 points, or 1.30 percent, at 3,384.19.

In Europe, the FTSEurofirst 300 of leading shares rose 1.05 percent to 1,219.14, while MSCI's all-country world equity index rose 0.99 percent to 371.55.

The dollar rose 1.01 percent to 98.94 yen, on pace for its biggest one-day rise in two weeks, while the euro rebounded a day after President Mario Draghi of the European Central Bank said it was technically ready for negative deposit rates.

The euro was up 0.49 percent to $1.3127.

German Bund futures fell to a session low of 146.11, down 105 ticks on the day, while the benchmark 10-year U.S. Treasury note was down 31/32 in price to yield 1.7279 percent.

Brent crude was up $1.88 at $104.73 a barrel, while U.S. crude gained $1.87 to $95.86 a barrel.

"The idea that employment is holding as well as it is in the face of the fiscal headwinds the economy is currently enduring is a very positive sign of the economy's underlying fundamental improvements," said Russell Price, a senior economist at Ameriprise Financial Services.

The better jobs data comes just a month after the Bank of Japan promised to inject about $1.4 trillion into its economy to spur growth and end decades of deflation.

By increasing liquidity, three of the world's major central banks have fueled a rally in share and bond markets that has driven many benchmark indexes back up to levels last seen before the financial crisis began.