GLOBAL MARKETS-Dollar, stocks rise as U.S. jobs data boosts taper talk

Fri Dec 6, 2013 4:19pm EST

* 203,000 new jobs added in Nov; jobless rate at 7.0 pct

* Dollar rallies against yen

* Bonds retrace earlier losses; investors mull Fed policy

By Herbert Lash

NEW YORK, Dec 6 (Reuters) - Global equity markets surged and the dollar rose against the yen on Friday after stronger-than-expected U.S. jobs data gave investors confidence the economy is strong enough to withstand an expected reduction in Federal Reserve stimulus.

The Labor Department's monthly report on the main U.S. employment indicator -- nonfarm payrolls -- bolstered the view that the jobs market in the world's biggest economy is on the mend and that the Fed will soon begin reducing its stimulus.

The debate over when the Fed will start to reduce the flow of cheap money has dominated markets worldwide for months.

A total of 203,000 jobs were added in November, beating expectations for 180,000, while the unemployment rate dropped three-tenths of a percentage point to a five-year low of 7 percent.

The dollar jumped to session highs against the yen and stocks on Wall Street surged, with the Nasdaq setting a record intraday high for the year and the Dow and S&P rising more than 1 percent.

"I don't think the Fed is in a big rush to do anything drastic in the absence of inflation. A few strong jobs numbers do not mean we are out of the woods," said Michael Marrale, head of research, sales and trading at ITG in New York.

"That said, we are in a very good spot and we can offset growth with tapering and we come out of this in one piece."

Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, said that rising incomes stand out as even more important than the job gains.

"Wages are strongly driving consumption in this cycle more than any other time. Overall wage gains were the most compelling news in this data," Porcelli said.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.05 percent to 80.277.

Against the yen, the dollar was last up 1.06 percent at 102.86 yen. The dollar's gains versus the euro were short-lived, as the euro zone common currency was boosted by rising short-term interest rates a day after the European Central Bank dampened hopes for an imminent easing move.

The euro was up 0.25 percent against the dollar to $1.3701.

Other data also was bullish for stocks. Consumer spending increased 0.3 percent in October, or one-tenth of a percentage point more than expected, after rising 0.2 percent in September.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment jumped to 82.5 for December, up from a final reading of 75.1 in November. This was the highest reading for the index since July and topped analysts' forecasts for a reading of 76.

MSCI's all-country world equity index, which tracks shares in 45 nations, rose 0.81 percent, while the pan-European FTSEurofirst 300 index gained 0.72 percent to close at 1,270.38.

The Dow Jones industrial average rose 198.69 points, or 1.26 percent, to 16,020.2. The S&P 500 gained 20.06 points, or 1.12 percent, to 1,805.09 and the Nasdaq Composite added 29.356 points, or 0.73 percent, to 4,062.521.

U.S. Treasury yields, a benchmark for borrowing costs around the world, briefly climbed above 2.9 percent, and later the 10-year note was up 2/32 in price to yield 2.8553 percent.

Bund futures settled up 22 ticks at 140.11 euros.

U.S. gold futures for February delivery underperformed spot prices, to settle down $2.90 at $1,229.

Brent crude settled up 0.63 percent at $111.61 a barrel. U.S. crude settled up 27 cents at $97.65 a barrel.