Stocks fall, bonds rally after U.S. jobs data

NEW YORK (Reuters) - Wall Street stock prices fell and U.S. bond prices rose on Friday after the monthly U.S. employment data came close enough to forecast to stoke bets the Federal Reserve will raise interest rates for the first time in nearly a decade perhaps as early as September.

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The U.S. Labor Department said employers added 215,000 jobs in July, slightly below a Reuters poll of 223,000 jobs, but the unemployment rate held at a seven-year low of 5.3 percent and there were signs that wages were beginning to pick up.

“It should be enough to get the Fed to start moving,” Erik Wytenus, global investment specialist at J.P. Morgan Private Bank in New York, said of the July U.S. payrolls report.

The prospect of higher U.S. interest rates has made the dollar significantly more attractive to investors in the past year, which in turn has lowered demand for commodities and crimped U.S. corporate earnings from exports.

The U.S. dollar index .DXY, which tracks the greenback versus a basket of euro EUR=, yen JPY= and four other currencies, reached 98.334, its highest since late April before turning lower to 97.604, down 0.2 percent from Thursday.

On Wall Street, the Dow Jones industrial average .DJI fell 44.97 points, or 0.26 percent, to 17,374.78, the S&P 500 .SPX shed 5.66 points, or 0.27 percent, at 2,077.90 and the Nasdaq Composite .IXIC lost 11.67 points, or 0.23 percent, at 5,044.77.

European's top shares fell 0.9 percent at 1,574.37 .FTEU3 after data showed German exports and industrial output falling in June, a setback that underlined the need for central bank stimulus in the euro zone.

Tokyo's Nikkei .N225 ended up 0.3 percent.

The MSCI world equity index .MIWD00000PUS, which tracks shares in 45 nations, fell 0.25 percent, to 422.14.

In debt markets, the U.S. yield curve flattened as longer-dated bond prices rose with traders believing a possible Fed rate hike would erode the value of shorter maturity debt faster than longer dated bonds.

Short term interest rate markets signaled traders were pricing higher the chances the U.S. central bank would end its near zero rate policy at its September, but it remained a close call.

Benchmark 10-year U.S. Treasuries notes US10YT=RR were up 17/32 in price for a yield of 2.173 percent, down six basis points from Thursday, while two-year notes US2YT=RR slipped 1/32 for a 0.725 percent, up nearly two basis points.

Oil prices remained under pressure on worries about oversupply and weak global demand, but gold bucked the trend although by not enough to see the precious metal avoid its longest weekly losing streak since 1999.

Oil posted its sixth consecutive week of losses, the longest run since the start of the year. Brent crude LCOc1 settled down 91 cents, or 1.84 percent, at $48.61 a barrel. U.S. crude CLc1 settled down 79 cents, or 1.77 percent, at $43.87 per barrel.

Spot gold prices XAU= rose $2.59 or 0.24 percent, to $1,091.60 an ounce, rebounding from an earlier low of $1,082.76.

Additional reporting by John Geddie and Marc Jones in London,; Saikat Chatterjee in Hong Kong, editing by Larry King, Clive McKeef and Frances Kerry