* Stocks gain on earnings optimism, narrower U.S. trade gap
* Euro strengthens, setting one-week high against dollar
* Oil prices rise, bonds retreat after stocks rally
By Herbert Lash
NEW YORK, April 12 Global stocks rose and the euro gained on Thursday after a narrower U.S. trade gap prompted by record-high exports eased concerns about a weak labor market and stoked optimism over the outlook for corporate earnings.
Shares on Wall Street and in Europe advanced broadly after briefly falling on data about unexpectedly high initial claims for unemployment benefits, which boosted worries that recent jobs data for March indicated a still struggling U.S. labor market.
But other data showed that the U.S. trade deficit shrank 12.4 percent to $46 billion in February, the biggest month-to-month decline since May 2009, the Commerce Department said, as exports hit a record high.
The record exports could lead economists to raise their estimates for first-quarter U.S. gross domestic product and bolster growth in the second quarter, which bodes well for the beaten-down outlook for earnings.
"The trade data is a lot better than expected," said Eric Green, chief economist at TD Securities in New York.
"There was a big improvement in the real trade deficit, so I think it's reasonable to expect a modest tailwind to growth in Q2 coming from the trade data, as opposed to a modest headwind. I think this puts GDP at 2 percent or higher."
The Dow Jones industrial average was up 81.63 points, or 0.64 percent, at 12,887.02. The Standard & Poor's 500 Index was up 9.23 points, or 0.67 percent, at 1,377.94. The Nasdaq Composite Index was up 23.51 points, or 0.78 percent, at 3,039.97.
Traders bid up material and energy shares as chatter circulated about a stronger outlook for Chinese growth on speculation that China on Friday will release data that will show GDP growth accelerated in the first quarter.
The S&P materials sector rose 2.0 percent, while the energy sector gained 1.4 percent.
The FTSEurofirst 300 index of top European shares was up 1.1 percent at 1,044.69.
"Earnings so far have been better than expected, and that reinforces the view that forecasts had gotten too pessimistic," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $571 billion in assets under management.
"Expectations had been revised significantly lower, but now they're stabilizing, and I think there's a chance we could exceed them," Joy said.
Initial claims for unemployment benefits unexpectedly rose last week, raising concerns the U.S. labor market continues to struggle.
Initial claims increased 13,000 to a seasonally adjusted 380,000, the Labor Department said, defying economists' expectations for a drop to 355,000.
Some economists blamed the Easter holiday for the spike in claims and expected applications to trend lower in coming weeks.
U.S. government debt prices pared gains to trade at break-even or lower. The benchmark 10-year U.S. Treasury note was unchanged in price to yield 2.04 percent.
The dollar was down against a basket of major trading-partner currencies, with the U.S. Dollar Index off 0.48 percent at 79.410.
The euro was up 0.50 percent at $1.3175.
Brent crude oil rose above $120 per barrel.
ICE Brent futures added 32 cents to $120.50 a barrel. U.S. crude oil was up $1.16 at $103.86.
Before the U.S. data release, European shares had traded higher and the euro hit a one-week high against the dollar as investors took in stride a jump in Italy's borrowing costs despite growing concern about the euro zone debt crisis.