(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 4 (Reuters) - U.S. Treasury bond prices
rose but stocks were little changed on Friday after the biggest
monthly decline in U.S. payrolls in five years fed expectations
the Federal Reserve will cut interest rates further to bolster
the sluggish U.S. economy.
Trading in the energy, currency and equity markets around
the globe was choppy as investors assessed the outlook for the
U.S. economy and how much more damage a global credit crunch
can inflict.
A drop in March U.S. payrolls, as well as revisions that
showed bigger declines in January and February, led many
investors to believe the Fed would continue to cut rates
aggressively.
The dollar slipped against the euro after the employment
data, but oil prices rose more than 2 percent as the dollar's
weakness following the jobs data outweighed fears of a demand
slowdown in the world's biggest energy consumer.
Gold gained as the oil rally and weaker-than-expected U.S.
jobs data pushed the dollar down and boosted its appeal as an
alternative investment. A weaker dollar makes gold cheaper for
holders of other currencies and often spurs demand.
The U.S. unemployment rate jumped to 5.1 percent last month
from 4.8 percent in February, stirring speculation of more
aggressive rate cuts.
Investors already know that in the short term, economic
data is going to be bad, but many look for a rebound in this
year's second half, said Henk Potts, a strategist at Barclays
Wealth.
"The big question for investors is, 'Have the aggressive
interest rate cuts from the Fed and the stimulus packages
coming through ... been enough to generate a bounce-back in the
broader economy in the second half?'" said Potts.
U.S. equity markets see-sawed through much the day, with
the Nasdaq rising as much as 1 percent and the Dow and the S&P
500 Index, a broader gauge of market sentiment, staying above
water for much of the session.
The Dow Jones industrial average <> closed down 16.61
points, or 0.13 percent, to 12,609.42. The Standard & Poor's
500 Index <.SPX> rose 1.09 points, or 0.08 percent, to
1,370.40. The Nasdaq Composite Index <> rose 7.68 points,
or 0.32 percent, to 2,370.98.
While the jobs data was disappointing, a surge in
economically sensitive stocks in recent weeks suggests
investors believe the worst may be nearly over, said Al
Goldman, chief market strategist at Wachovia Securities in St.
Louis.
"I think the market is in a bottoming process, that we've
seen the lows, that bottoms take a while. I think momentum is
up and early weakness would be a buying opportunity," he said.
It was the first time the U.S. economy shed jobs for three
straight months since a five-month decline in 2003, when the
economy was mired in a jobless recovery from the 2001
recession.
In U.S. Treasury debt trading, the benchmark 10-year U.S.
Treasury note <US10YT=RR> rose 28/32 to yield 3.4845 percent
while the 2-year Treasury note <US2YT=RR> gained 5/32, to yield
1.8306 percent.
"The downbeat labor report confirms why consumer confidence
sank so deep this quarter and why the Fed will have to keep
lowering interest rates at their future meetings," said Brian
Fabbri, managing director of economic research at BNP Paribas
in New York.
European shares closed higher in a volatile session, led by
mining shares and UBS, which is under pressure to break up. But
the surprisingly large fall in U.S. jobs data tempered gains.
The FTSEurofirst 300 index <> of top European shares
rose 0.48 percent to 1,318.43 points, pushing gains for the
week to 4.1 percent, the strongest weekly performance in over a
year.
UBS <UBSN.VX> was among the top gainers, rising 3.3
percent, after former Chief Executive Luqman Arnold pushed to
have the Swiss bank broken up.
Euro zone government bond prices rose, pushing most yields
lower, after the U.S. jobs data helped to raise prospects of
another interest rate cut.
Earlier, Japan's Nikkei stock average <> slid 0.7
percent, although it ended the week up 3.7 percent, its third
successive week of positive finishes.
In currency trading, the dollar fell against a basket of
major trading-partner currencies, with the U.S. Dollar Index
<.DXY> down 0.25 percent at 71.973.
The euro <EUR=> rose 0.31 percent to $1.5727, and against
the Japanese yen the dollar <JPY=> fell 0.73 percent to
101.53.
Oil rose after the U.S. unemployment numbers triggered
falls in the dollar, whose weakness has boosted oil and other
dollar-denominated commodities as investors pour money into
those assets to hedge against inflation.
U.S. crude <CLc1> settled up $2.40 to $106.23 a barrel
while London Brent <LCOc1> crude gained $2.38 to $104.90.
Spot gold prices <XAU=> in New York rose $10.70, or 1.19
percent, to $913.60.
(Additional reporting by Chris Reese and Nick Olivari in New
York and Amanda Cooper, Margaret Orgill and George Matlock in
London; Editing by Dan Grebler)
