GLOBAL MARKETS-US stocks fly on oil’s dip, job data; euro gains

* Oil falls on Chavez’s Libya mediation proposal

* World stocks rise as oil dips

* Jobless claims boost U.S. stocks

* ECB buoys euro with inflation comments
(Updates with US stocks closing prices)

By Caroline Valetkevitch

NEW YORK, March 3 (Reuters) – Wall Street scored its best
one-day rally in three months on Thursday, due to a pullback
in oil prices and upbeat U.S. labor market data, while the
euro jumped on the European Central Bank president’s warning
about inflation.

Data showing new U.S. claims for unemployment benefits
fell last week to their lowest level in more than 2-1/2 years
represented the latest optimistic reading to bolster hopes for
an upside surprise in Friday’s key payrolls report.

“There are still concerns about high oil prices, but the
bottom line is: The U.S. economy is improving. We continue to
get confirmations of that, and it’s a good sentiment heading
into Friday’s numbers,” said Ryan Detrick, technical analyst
at Schaeffer’s Investment Research in Cincinnati, Ohio.

ECB President Jean-Claude Trichet’s comments on
inflationary risks were widely expected, but he surprised
investors by saying the bank may raise interest rates as soon
as next month.

The heightened concerns about inflation followed months of
sharp gains in oil and other commodities, with Brent crude oil
up roughly 15 percent since the end of January.

The latest batch of purchasing managers’ indexes (PMI) in
Europe and elsewhere suggested fast-building inflationary
pressures. For details, see [ID:nLDE7220L8]

World stocks as measured by the MSCI Index (.MIWD00000PUS: Quote, Profile, Research)
rose 1.1 percent.

On Wall Street, both the blue-chip Dow Jones industrial
average (.DJI: Quote, Profile, Research) and the benchmark Standard & Poor’s 500 index
(.SPX: Quote, Profile, Research) posted their biggest one-day gains since Dec. 1.


Oil prices fell after Venezuela President Hugo Chavez made
a proposal to broker a peace deal in Libya.

Some oil analysts suggested the Chavez proposal was a
convenient excuse for traders to adjust their positions.

“The market was a little overstretched to the upside, and
the Chavez peace proposal gave traders a reason to square
positions,” said Tom Bentz, broker at BNP Paribas Commodities
Futures Inc in New York.

Brent crude oil (LCOc1: Quote, Profile, Research) fell $1.56 to settle at $114.79 a
barrel. On Wednesday, crude approached 2-1/2-year highs as
violence escalated in oil producer Libya.

On the New York Mercantile Exchange, April crude (CLJ1: Quote, Profile, Research)
fell 32 cents, or 0.31 percent, to settle at $101.91 a

Investors worry if it is not halted soon, the political
instability could spread to major oil producer Saudi Arabia, a
central U.S. ally in the region, and other oil suppliers.


Global and euro zone services PMI graphic:



Earlier this week, ADP data showed U.S. private-sector
employers added more jobs than forecast last month.

In another sign of improvement in the labor market, a
gauge of employment in a report on the U.S. services sector on
Thursday rose to a near five-year high in February.

A Reuters survey for Friday’s February jobs report shows
nonfarm payrolls probably increased by 185,000 after
snowstorms held growth to a paltry 36,000 jobs in January. The
survey was conducted before data on Monday showed strong
factory hiring, which prompted some economists to rethink
their forecasts. [ID:nN02222564]

The “whisper number” among traders is that the non-farm
payrolls will rise by over 200,000.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) gained 191.40
points, or 1.59 percent, to end at 12,258.20. The S&P 500 rose
22.53 points, or 1.72 percent, to finish at 1,330.97. The
Nasdaq Composite Index (.IXIC: Quote, Profile, Research) jumped 50.67 points, or 1.84
percent, to close at 2,798.74.

As stocks rose on the jobless claims data, U.S. bonds
fell. The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) was down 23/32,
its yield rising to 3.56 percent from 3.47 percent on


The euro gained against the U.S. dollar to a fresh
four-month high. It climbed as high as $1.3976 (EUR=EBS: Quote, Profile, Research) on
trading platform EBS, and and was at $1.3963 — up 0.7 percent
on the day.

Gold prices fell on Trichet’s comment. Spot gold (XAU=: Quote, Profile, Research),
which hit a record high this week, dropped as low as $1,411.52
an ounce on Thursday.

Trichet said the ECB will exercise “strong vigilance” over
rising inflation. For Trichet’s comments see [ID:nLOOKCBANK]
(Reporting and writing by Caroline Valetkevitch; Additional
reporting by Robert Gibbons, Wanfeng Zhou, Angela Moon and
Edward Krudy in New York; Jeremy Gaunt in London; Editing by
Jan Paschal)