* US dollar posts sharp gains after U.S. jobs report
* Government debt tumbles after jobs data boosts optimism
* Global stocks end mostly flat after May jobs data
* Oil slips after hitting 7-month high over $70 a barrel
(Adds close of U.S. markets activity)
By Herbert Lash
NEW YORK, June 5 (Reuters) - The U.S. dollar gained
sharply, and bond yields soared on Friday, but global stocks
were little changed after some investors viewed news of slowing
U.S. job losses in May as another sign of economic recovery.
Stock and oil prices initially rose on the much
better-than-expected U.S. employment data, but after climbing
to more than $70 a barrel, crude prices ended lower and stocks
ended little changed.
While U.S. employers cut 345,000 jobs last month -- the
fewest since September last year and far less than economists
had forecast -- unemployment hit its highest rate in nearly 26
years, a reminder that the economy is far from recovery.
The unemployment rate raced to 9.4 percent, the highest
since July 1983, from 8.9 percent in April.
"The unemployment numbers were great in that there were
fewer people losing their jobs, but the rate of unemployment
rose more than expected," said Phil Flynn, an analyst at Alaron
Trading in Chicago.
"That is disappointing for the market as it raises worries
about the long-term prospects in the job market," he said.
The Dow Jones industrial average <> closed up 12.89
points, or 0.15 percent, at 8,763.13. The Standard & Poor's 500
Index <.SPX> fell 2.37 points, or 0.25 percent, at 940.09. The
Nasdaq Composite Index <> fell 0.60 points, or 0.03
percent, at 1,849.42.
Investors opted to book profits from the market's recent
winners -- materials, energy, financial and technology shares.
Shares of JPMorgan Chase & Co <JPM.N> dropped 2.3 percent,
Chevron Corp <CVX.N> dipped 0.6 percent and Newmont Mining
<NEM.N> shed 5.5 percent. Wells Fargo & Co fell 1.5 percent.
European shares rose, led by miners, banks and oil
producers, as U.S. jobless data boosted sentiment.
The FTSEurofirst 300 <> index of top European
companies closed up 0.7 percent at 872.29 points, for a weekly
gain of about 1.2 percent.
Asian shares had risen overnight, trading off positive
signals seen in Thursday's weekly U.S. jobless claims data. The
MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS>
rose 1.1 percent.
US TREASURY BOND MARKET ROCKED
The smaller-than-expected loss of U.S. jobs in May slammed
the U.S. Treasury debt market on Friday, kindling fears the
Federal Reserve might raise interest rate sooner than
previously thought.
This abrupt shift in rate outlook also caused the largest
weekly jump in benchmark U.S. 10-year yields in nearly six
years.
Benchmark 10-year note <US10YT=RR> traded 1-1/32 lower in
price while its yield ended around 3.84 percent after hitting a
six-month high of 3.90 percent.
The U.S. two-year note <US2YT=RR>, which is more sensitive
to changes in Fed rate expectations, ended down 21/32 for a
yield of 1.30 percent from 0.96 percent late on Thursday.
Longer-dated euro zone debt tumbled to the lowest level in
nearly seven months
Long-dated U.S. Treasury yields have risen swiftly since
March on anxiety over inflation stemming from the $2 trillion
in new government borrowing this fiscal year. There have also
been concerns that a burgeoning federal debt load will choke
off nascent signs of economic stabilization and end up damaging
the dollar and United States' credit rating in the long run.
"We are going to have to start raising rates or you'll have
hyper-inflation," said Howard Simons, market strategist at
Bianco Research in Chicago.
U.S. DOLLAR BENEFITS
The U.S. dollar rebounded, on track to its largest weekly
gain in nearly two months against major currencies.
The dollar's rise surprised some in the market because
strong economic data has generally been seen as a boost to
risk, leading the greenback to fall.
"The view here is that these better-than expected jobs
numbers should enable the United States to come out of
recession first, leading to a stronger dollar overall," said
Brian Dolan, chief currency strategist at Forex.com in
Bedminster, New Jersey.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 1.55 percent at 80.704.
The euro <EUR=> fell 1.56 percent at $1.3966, while against
the yen, the dollar <JPY=> was up 2.35 percent at 98.84.
The sharply rebounding dollar also weighed on copper. A
strong U.S. currency makes metals priced in dollars more
expensive for holders of other currencies. []
U.S. crude for July delivery <CLc1> settled down 37 cents
at $68.44 a barrel. The intraday high was set at $70.32
London Brent <LCOc1> last traded down 37 cents at $68.34.
The August gold contract <GCQ9> settled down $19.70 at
$962.60 an ounce in New York
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, Janet
McGurty and Frank Tang in New York; Dominic Lau, Christopher
Johnson and Kirsten Donovan in London; writing by Herbert
Lash)
