By Walter Brandimarte
NEW YORK (Reuters) - U.S. and European stocks jumped and the dollar steadied on Thursday after better-than-expected U.S. jobs data bolstered investor confidence in the global economy, causing gold prices to retreat from all time-highs.
The number of U.S. workers filing new claims for jobless benefits fell more than expected last week to a 10-month low, while worker productivity surged at a 9.5 percent annual rate, improving the outlook for both the economy and inflation.
The more stable dollar put a damper on commodity prices in general. U.S. crude oil prices dropped as much as $1 per barrel, snapping a three-day rally, as investors adopted a cautious tone before Friday's key U.S. employment report.
Advertisement starts
Advertisement ends
Short-dated U.S. Treasury prices rose on the benign inflation outlook, which resonated with the U.S. Federal Reserve's pledge a day earlier to keep interest rates low for "an extended period."
Long-dated Treasury prices fell, however, on concerns about upcoming supply of bonds and as the positive news on the economy curbed the safe-haven bid for government debt.
Wall Street stock indexes closed about 2 percent higher, with the Dow closing about 10,000 for the first time in two weeks.
The surprising drop in new claims for U.S. jobless benefits helped, and created "some anticipation that maybe tomorrow's employment report may be better than expected," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto warned that Friday's key monthly U.S. employment report will be the real test for markets.
"Unemployment is already close to 10 percent, but if it comes out at 10 or above, then there will be worries that the consumers are not there for spending, and that will hurt the market," he said.
Wall Street was also supported by a rally in technology shares after Cisco Systems Inc
The Dow Jones industrial average <.DJI> ended up 203.82 points, or 2.08 percent, at 10,005.96, while the Standard & Poor's 500 Index <.SPX> climbed 20.13 points, or 1.92 percent, to 1,066.63. The Nasdaq Composite Index <.IXIC> rose 49.80 points, or 2.42 percent, to 2,105.32.
MSCI's all-country world stock index <.MIWD00000PUS> rose 0.8 percent while the pan-European FTSEurofirst <.FTEU3> ended up 0.6 percent at 990.53 points -- its highest close since October 29.
Retailers were among the top gainers in Europe, led by the Belgian group Delhaize
"Everybody was cautious in the last few days, but the macro-economic data gave the market a little push," said Giuseppe-Guido Amato, strategist at Lang & Schwarz. "We see a good support here."
Emerging market stocks gained 0.49 percent according to a benchmark MSCI index <.MSCIEF>.
Japan's Nikkei <.N225> closed down 1.3 percent, though, before the release of the weekly U.S. jobless claims data.
Renewed economic hopes also allowed the U.S. dollar to edge 0.1 percent higher against a basket of major currencies <.DXY>.
The euro was unchanged against the greenback at $1.4876, erasing initial gains that had been fuelled by an optimistic growth forecast for the eurozone delivered by European Central Bank President Jean-Claude Trichet.
Against the Japanese yen, the dollar was up 0.06 percent at 90.73.
GOLD OFF HIGHS, OIL LOWER
The dollar's modest gains helped halt a series of increases in commodity prices.
U.S. crude oil prices fell 78 cents, or 0.97 percent, to settle at $79.62 a barrel, while spot gold prices fell $1.55, or 0.14 percent, to $1,090.60.
Gold prices reached an all-time high of $1,097.25 an ounce on Wednesday, and investors decided to pocket part of the gains after the metal failed to breach the psychological level of $1,100.
"The fact that we didn't manage to go through $1,100 might lead some investors to reconsider their positioning in the sector," said Commerzbank analyst Eugen Weinberg.
The Reuters/Jefferies CRB Index <.CRB> was down 2.64 points, or 0.95 percent, at 274.30.
Benchmark 10-year U.S. Treasury notes were down 3/32, with the yield at 3.5293 percent, while 2-year notes were up 1/32, with the yield at 0.8805 percent.
The 30-year U.S. Treasury bond was down 5/32, with the yield at 4.4031 percent. (Additional reporting by Angela Moon, Jan Harvey, Ellen Freilich, Wanfeng Zhou; Editing by Leslie Adler)
