(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
* Oil surges above $133 a barrel on U.S. jobs report
* Unexpected jump in U.S. unemployment rate sparks bond
rally
* Dollar weakens, global stocks fall on payroll report
By Herbert Lash
NEW YORK, June 6 (Reuters) - Oil surged, the dollar
weakened and government debt turned strongly higher on Friday
after an unexpected jump in the U.S. unemployment rate rattled
investors who believe the American economy was recovering.
Europe stocks and U.S. stock futures fell sharply after
data showed the U.S. unemployment rate rose to its highest
level in more than 3-1/2 years as American employers shed jobs
for a fifth straight month in May.
The unemployment rate rose to 5.5 percent last month from 5
percent, its highest level since October 2004. Some 49,000 jobs
were cut from payrolls in May, up from a revised 28,000 that
were lost in April, the Labor Department said.
The FTSEurofirst 300 <> index of top European shares
declined 0.7 percent at 1,300.20 points after the announcement.
The index had traded flat just before the data was released.
The data surprised investors, giving them second thoughts
about the health of the U.S. economy after recent data
suggested a recession had been averted as the economy proved
more resilient than many economists had expected.
"We usually look at the big non-farm payroll figure but
this time it seems to be the actual unemployment rate which has
risen quite dramatically," said Angus Campbell, head of sales
at Capital Spreads. "It's not looking great when the last few
weeks we've had glimmers of hope for the market place."
"A lot of people were saying a recession has actually just
about been avoided but it's like the Titanic -- they thought
they'd got away with it at first when they just shaved the
iceberg but slowly and surely the ship did have irreparable
damage and everything went under," Campbell said.
S&P 500 futures <SPc1> fell 6.4 points, below fair value, a
mathematical formula that evaluates pricing by taking into
account interest rates, dividends and time to expiration on the
contract.
Dow Jones industrial average futures <DJc1> fell 55 points,
while Nasdaq 100 <NDc1> futures fell 10.5 points.
Oil rose by more than $3 to above $131 a barrel, bringing
gains in the last two days to $9 as the dollar weakened further
on a jump in the jobless rate.
Comments from Israel's transport minister that an attack on
Iranian nuclear sites looked "unavoidable" given the apparent
failure of sanctions to deny Tehran technology with bomb-making
potential also helped drive crude prices higher.
U.S. light crude for July delivery <CLc1> was up $3.23 at
$131.02 a barrel.
U.S. Treasury debt prices shed losses and rose.
Benchmark 10-year Treasury notes <US10YT=RR> traded 14/32
higher to yield 3.99 percent, while 2-year Treasury notes
<US2YT=RR> traded 2/32 higher to yield 2.48 percent.
The dollar dropped and the euro <EUR=> gained against the
dollar to $1.5673 from $1.5590. Against the yen <JPY=>, the
dollar fell to 105.82 yen from 106.30 yen.
"This is more of a knee jerk reaction and things will
settle down but the short term trend still favors a weaker U.S.
dollar," said George Davis, chief technical strategist at RBC
Capital Markets in Toronto.
Earlier, repercussions from the European Central Bank
saying it could raise interest rates swept across markets,
hammering short-tern euro zone debt and lifting global stocks,
which rallied as investors fled bonds and rolled over into
stocks.
ECB President Jean-Claude Trichet jolted markets on
Thursday by saying higher benchmark interest rates were
"possible" in July, kicking the euro higher and driving up bond
yields as investors sold government debt.
Stock markets had generally been buoyant ahead of the U.S.
payroll data.
(Additional reporting by Simon Walker, Chris Reese,
Gertrude Chavez-Dreyfuss and Nick Olivari in New York, Blaise
Robinson in Paris and Michael Taylor and Margaret Orgill in
London)
(Editing by Theodore d'Afflisio)
