* Kudlow says U.S., China negotiations to continue next week
* World stocks on track for second week of gains
* U.S. Treasury yields dip (Updates with close of European markets)
By Chuck Mikolajczak
NEW YORK, April 5 (Reuters) - Global stocks rose to a fresh six-month high on Friday as U.S. labor market data eased concerns about an economic slowdown, while optimism that a trade deal between the United States and China was drawing closer also lifted sentiment.
After outsized results some analysts saw as distorted by the partial government shutdown in the prior two months, data showed U.S. employment growth accelerated from a 17-month low in March, buoyed by milder weather.
U.S. short-term interest-rate futures held on to earlier slight losses after the data, as contracts tied to the Federal Reserve’s policy rate continue to price in a little less than a 50 percent chance of an interest rate cut by year’s end, and a little more than even odds for a cut early next year.
“We are certainly seeing lots of green shoots in the economy, especially service PMIs, employment numbers; the consumer is a really strong driver of this economy and GDP is inching up,” said Janet Johnston, portfolio manager at TrimTabs Asset Management in New York.
“We are seeing a disconnect between the stock and the bond markets that the bond market thinks we are going to have a recession and the stock market is acting like the worst is over.”
The Dow Jones Industrial Average rose 28.55 points, or 0.11%, to 26,413.18, the S&P 500 gained 11.47 points, or 0.40%, to 2,890.86 and the Nasdaq Composite added 42.96 points, or 0.54%, to 7,934.74.
The S&P 500 was on pace for a seventh straight day of gains.
U.S. and Chinese trade negotiators will continue talks next week by video conference as they try to reach a deal to resolve the trade war, White House adviser Larry Kudlow said on Friday.
The pan-European STOXX 600 index rose 0.09%, notching its best weekly performance in three weeks, and MSCI’s gauge of stocks across the globe gained 0.29% and was poised for a second straight weekly gain.
Better-than-expected data out of Germany, along with the U.S. jobs report, and a possibly delayed British departure from the European Union also helped boost risk appetite for European shares.
German industrial output rose 0.7% in February as mild weather helped a surge in construction activity, although manufacturing production slipped.
U.S. Treasury yields dipped, with the yield curve US2US10-TWEB flattening, as investors who took a gloomier view of the March U.S. payrolls report stepped into the market, buying longer-dated Treasuries.
Benchmark 10-year notes last rose 1/32 in price to yield 2.5061%, from 2.51% late on Thursday.
President Donald Trump said on Friday the Fed should lower rates, noting the jobs numbers showed the economy had performed well but adding that action by the U.S. central bank had really slowed down the economy.
In currencies, the dollar moved slowly higher, on track for a third straight week of gains against a basket of major currencies. The dollar index rose 0.1%, with the euro down 0.07% to $1.1212.
Reporting by Chuck Mikolajczak in New York Editing by James Dalgleish