* Euro, pound claw back vs dollar; ECB, BOE hold rates
* European shares, bonds add to gains as periphery extends rally
* U.S. crude prices come off 5-week low
* U.S. focus on start of earnings season, jobs data
By Marc Jones
LONDON, Jan 9 (Reuters) - A strong rally in euro zone periphery bonds and stocks extended into a third day as investors, awaiting signals from the European Central Bank, bet on further economic improvements in the bloc.
The ECB and the Bank of England both kept their respective 0.25 percent and 0.5 percent interest rates unchanged on Thursday, but markets were on alert for any signs of future ECB monetary stimulus moves or shifts in the economic outlook.
A jump in the euro zone sentiment index to a 29-month high for December set a positive mood for the ECB's 1330 GMT news conference, having helped re-ignite markets, particularly those in southern Europe, after a brief early wobble.
Spanish and Italian bourses had both jumped more than 1 percent by 1100 GMT, while Portugal's main stock market added over 0.5 percent to take its gains so far this year past 8 percent.
Their bonds were in demand again too and both the euro and sterling were also able to claw back some ground they have conceded in recent days to the dollar, which had been lifted by strong U.S. data.
The pound was at $1.6469 while the euro looked the firmer of the two gainers up 0.3 percent at $1.3610. But with euro zone inflation bumping along at very low levels, HSBC FX strategist David Bloom expected the ECB to reiterate it remains on guard later - a move that could weaken the currency.
"I would say at least some dovish rhetoric from the ECB... I think this mini dollar-rally, on the view the Fed is going to taper (the amount it pushes out as stimulus) and the ECB is going to loosen (eventually), is going to stay with the market."
ECB chief Mario Draghi has been at pains to stress in recent months that the bank is prepared to ease its record low interest rates below 0.25 percent and test out other, more unconventional, policy options if necessary.
With euro zone inflation running at just 0.8 percent in December, deflation could become a risk if prices continue to slow.
In most respects though, the euro zone has got off to a good start this year. Germany's economy is gaining strength and bailed-out Ireland has seen a strong return to borrowing markets, which in turn has lifted Portugal and other peripheral states.
Across the channel, Britain is performing even more strongly. Some traders had suggested the Bank of England might release a rare post-meeting statement to acknowledge the UK economy's progress, but it didn't. There was little reaction from sterling or gilts.
In Asian trading, shares once again wavered after a lacklustre performance on Wall Street overnight, following Federal Reserve minutes and ahead of the U.S. jobs report on Friday.
A sharper-than-expected slowdown in China's annual consumer inflation in December also caused some jitters in Asia but market reaction was limited.
New York was expected to see small rebound when trading resumes, but the first five trading days don't bode particularly well for 2014.
Since 1950, the direction of the S&P500 index of U.S. blue chips in the first five trading days of the year has predicted the full-year direction more than 85 percent of the time. At Wednesday's cut-off, it was still just in the red.
Perhaps more relevant for harder-headed investors will be the fourth-quarter earnings season in the United States, which kicks off on Thursday with earnings from mining giant Alcoa .
There will also be jobless claims figures at 1330 GMT, which are likely to set the tone for Friday's key non-farm jobs data.
"This is the "show me" year in terms of earnings," said Bill O'Neill, head of wealth management research at UBS. "You have to see an improvement."
Among commodities, gold was a tad higher at $1,230.05 per ounce, steadying after touching a one-week low on Wednesday.
U.S. crude futures advanced 0.6 percent to $92.88 a barrel, rebounding from a five-week low hit overnight after data showed a large build-up of stockpiles at the U.S. benchmark delivery point.
Brent crude gained 0.8 percent to top $108 per barrel, though copper prices, highly sensitive to the economic outlook for top consumer China, tumbled 1.2 percent to $7,256.25 on its way to a two-week low.
"I'm a bear on copper prices - I think $7,000 is a more sustainable level," said Helen Lau, a senior commodities analyst with UOB Kay Hian in Hong Kong.
"The dollar will continue to strengthen because of U.S tapering (stimulus withdrawal), and China's economic growth is slowing down."