By Herbert Lash
NEW YORK (Reuters) - Global equity markets rallied on Friday as investors pegged a poor U.S. jobs report on bad weather, but bond yields and the dollar fell as the data showed employers hired far fewer workers than expected in January, suggesting economic softness.
Non-farm payrolls rose by 113,000, well below the consensus of 185,000, although the unemployment rate hit a five-year low of 6.6 percent, the U.S. Labor Department said.
The dollar fell broadly while safe-haven gold and U.S. government debt prices rose on the unemployment report. Equities also rose, with investors writing off the weakest two months of U.S. job growth in three years on inclement weather.
The household survey from which the jobless rate is derived found strong gains in employment and an increase in the number of people in the labor force, off-setting concerns about a soft patch in the economy.
The proportion of working-age Americans with a job rose to 58.8 percent, the highest since October 2012.
"Markets are increasingly behaving as though the recent series of soft economic data is truly attributable to bad weather, and not some broader downturn in demand," said David Joy, chief market strategist at Ameriprise Financial in Boston.
"It's unlikely that the economic momentum from late last year simply stalled in December and January," Joy said.
U.S. gross domestic product grew by the most in a decade in the last half of 2013, the Commerce Department said last week.
MSCI's all-country stock index rose 0.80 percent, and its gauge of emerging markets <.MSCIEF> rose 0.71 percent.
The pan-European FTSEurofirst 300 index of leading shares closed up 0.71 percent to a provisional 1,299.53, helped by steelmaker Arcelor
Arcelor rose 0.81 percent to 12.495.
On Wall Street, the Dow Jones industrial average rose 98.42 points or 0.63 percent, to 15,726.95. The S&P 500 gained 14.88 points, or 0.84 percent, to 1,788.31 and the Nasdaq Composite added 48.57 points, or 1.2 percent, to 4,105.692.
"Expectations for the report were too high, and investors are giving the report the benefit of the doubt because of the weather," said Donald Selkin, chief market strategist at National Securities in New York.
After the sell-off earlier in the week, the fact equities are rising after Thursday's gains shows there is still momentum to the bull market, Selkin said.
"Stocks initially got killed after the report came out, but now we're pretty sharply higher. That's a strong sign that we've bottomed out," he said.
Though the labor market report called into question the strength of the economy, the preponderance of most economic data still shows some pretty good growth, said Anthony Valeri, investment strategist at LPL Financial in San Diego.
"We're seeing earnings on track to grow about 9 percent year-over-year, and as long as that's the case, the pullback in stocks is likely to be limited," Valeri said.
"The data hasn't been weak enough to suggest that the current earnings trajectory will deviate," he said.
Earnings have been holding up.
Of the 343 companies in the S&P 500 that have reported earnings to date for last year's fourth quarter, 67.9 percent beat analyst expectations, Thomson Reuters data show. In a typical quarter since 1994, 63 percent beat estimates.
The dollar index fell 0.18 percent to 80.763, as the euro gained 0.18 percent to 1.3612 against the greenback. The dollar rose 0.22 percent to 102.30 against the yen.
The benchmark 10-year U.S. Treasury note rose 8/32 in price, pushing its yield down to 2.6711 percent.
German Bund futures settled up 50 ticks at 143.83, retreating from earlier highs of 144.02, while cash 10-year yields on government debt fell to 1.66 percent.
Brent crude rose toward $108 a barrel after the fall in the U.S jobless rate fueled hopes for stronger demand in the world's top oil consumer.
Brent crude oil futures were up $1.13 at $108.32 a barrel. U.S. crude was up 61 cents at $98.45 a barrel.
(Additional reporting by Blaise Robinson in Paris, Reporting by Herbert Lash; Editing by Chris Reese and Andrew Hay)
