(Adds closing prices for oil stocks)
* Oil jumps again to near $146 ahead of long U.S. weekend
* Dollar gains on ECB's soft outlook, mild U.S. jobs data
By Herbert Lash
NEW YORK, July 3 (Reuters) - Global stocks and the dollar
pulled out of their recent slides to close higher on Thursday
as the markets' increasingly bearish expectations for European
rate rises and U.S. employment were dashed by a dose of
moderately favorable news,
Crude oil prices that eased off yet another record high of
$145.85 a barrel also buoyed equity investors' sentiment that
had been looking for the worst, pushing the S&P 500 index -- a
broad measure of the U.S. stocks -- briefly into a bear market.
U.S. light sweet crude oil <CLc1> rose 67 cents percent
to $144.24 after hitting a new high.
The euro fell and shares and euro zone government bonds
rallied after the European Central Bank poured cold water on
speculation that an aggressive interest rate policy was at
hand.
The ECB raised its benchmark rate by one-quarter percentage
point to 4.25 percent, the first G7 central bank to raise
interest rates since the credit crisis erupted last August, but
it scaled back expectations of further hikes.
Trading was light but volatile in a U.S. session that was
three hours shorter than normal because of the long American
holiday weekend to mark U.S. Independence Day on Friday.
A rally in super major oil companies and beaten-down
financial shares helped lift U.S. equities, as did a U.S. jobs
report for June that was not as weak as many feared.
ConocoPhillips and Chevron Corp <CVX.N> both rose about
1.2 percent, and Exxon Mobil Corp <XOM.N> rose almost 1
percent.
"The numbers weren't as bad as they could have been," said
Joe Saluzzi, co-manager of trading at Themis Trading in
Chatham, New Jersey. "Some people had feared 100,000 in job
losses or more."
The dollar's strength also buoyed sentiment as the price of
oil is priced in the U.S. currency, Saluzzi said.
Energy-related shares, including drillers, gas companies
and oil services, fell.
The Dow Jones industrial average <> rose 73.03 points,
or 0.65 percent, at 11,288.54. The Standard & Poor's 500 Index
<.SPX> added 1.37 points, or 0.11 percent, at 1,262.89. The
Nasdaq Composite Index <> fell 6.08 points, or 0.27
percent, at 2,245.38.
It was the fifth straight weekly loss for both the Nasdaq
and the Dow, and third weekly loss in a row for the S&P 500.
The tech-laden Nasdaq fell as semiconductor stocks suffered
after graphics chip maker Nvidia Corp <NVDA.O> cut its sales
and profit margin outlook, citing global market weakness.
vidia shares plunged 31 percent to close at
$12.49, while semiconductor stocks <.soxx> slipped almost 1
percent.
In Europe markets were taken by surprise when ECB President
Jean-Claude Trichet said he had "no bias" in terms of monetary
policy, remarks that investors interpreted as a sign no more
increases loomed.
Banking stocks rose as they usually benefit from an
environment of steady or falling rates, pushing up BNP Paribas,
Royal Bank of Scotland and Societe Generale by more than 4
percent.
The FTSEurofirst 300 index of top European shares closed up
0.87 percent at 1,178.04 points. The index swung between losses
of 1.6 percent and gains of 1.2 percent, marking its most
volatile day since late March.
"The vast majority of analysts were anticipating the
European Central Bank would have raised rates today," said Henk
Potts, a strategist at Barclays Stockbrokers.
"They also anticipated a very hawkish statement to come
through from that and it was certainly nowhere near as strong
as many had expected," he said.
Oil jumped. Some traders expected a weak U.S. dollar, lower
U.S. crude stocks and tension between Israel and major oil
producer Iran would push prices to $150 before the close of
trade, in line with a prediction made in early June.
Investment bank Morgan Stanley, one of Wall Street's
biggest energy traders, said crude could reach $150 by July 4.
"What is more concerning is it is very difficult to know
why it is going up. No one really knows the answer," said Colin
Morton with Rensburg Fund Management. "It seems to be about
momentum now. It's going up because it is going up."
The dollar rose broadly after expectations of the jobs data
and ECB rate stance were not nearly as bearish as many market
participants had thought.
U.S. payroll data for June suggested the American job
market had not deteriorated as much as many investors had
feared, while Trichet struck a less aggressive tone.
Demand for the dollar started to rise after the jobs report
for came in at a loss of 62,000 -- in line with expectations
and consistent with a mild recession. A much sharper decline in
payrolls would have triggered a sell-off in the U.S. currency.
"The unemployment number really didn't break the dollar's
back. The market was so bearish that I thought we would see a
minus-100 print, so this is moderately good news," said Boris
Schlossberg, senior currency strategist, at DailyFX.COM, in New
York.
Short-dated U.S. government debt prices edged up as weak
data reinforced a dour view of the U.S. economy and pared
expectations that the Federal Reserve will raise interest rates
any time soon.
The 2-year U.S. Treasury note <US2YT=RR> added 3/32 to
yield 2.53, but longer-dated debt fell. The benchmark 10-year
U.S. Treasury note <US10YT=RR> slid 3/32 to yield at 3.97
percent and the 30-year U.S. Treasury bond <US30YT=RR> slipped
14/32 to yield 4.53 percent.
In fact, traders bet a steady rate policy by the Fed will
be inflationary down the road as food and oil prices continue
to advance in record territories. They dumped long-dated debt
in favor of less inflation-sensitive shorter maturities.
"It smells like stagflation," said Tom Sowanick, chief
investment officer at Clearbrook Financial LLC in Princeton,
New Jersey.
Gold retreated on the dollar's gains and Trichet's comments
that were less hawkish than expected.
Gold prices <XAU=> fell $12.50 to $931.85.
The euro <EUR=> fell 1.16 percent at $1.5694. The dollar
rose against major currencies, with the U.S. Dollar Index
<.DXY> up 1.02 percent at 72.758. Against the yen, the dollar
<JPY=> rose 0.79 percent at 106.70.
"Part of it is the U.S. dollar but the market may also been
expecting more hawkish comments from the ECB," said Standard
Bank analyst Walter de Wet.
Asian stocks fell, with Japanese stocks posting their
longest losing streak in a half century on heightened fears
that record high oil and stagflation will slam company earnings
and consumer spending.
Japan's Nikkei share index <> fell 11th consecutive
day, the longest period of daily declines since 1954.
The MSCI index of Asia-Pacific shares <.MSCIAPJ> traded
outside of Japan fell 1.4 percent to the lowest since a blowup
in the U.S. subprime mortgage sector turned into a global
credit crisis 10 months ago.
(Reporting by Walker Simon, Richard Leong and Vivianne
Rodrigues in New York and Amanda Cooper, Ikuko Kao, Jan Harvey
and Raissa Kasolowsky in London)
(Reporting by Herbert Lash. Editing by Richard Satran)
