Global stocks, oil rally on economic optimism

By Herbert Lash

NEW YORK (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 .DJI 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 .IXIC 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.