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

* 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 prices, quotes, adds oil settlement)

By Caroline Valetkevitch

NEW YORK, March 3 (Reuters) – U.S. stocks shot up on
Thursday after a pullback in oil prices and upbeat U.S. labor
market data, while the euro rallied 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
was the latest optimistic reading to bolster hopes for an
upside surprise in Friday’s key payrolls report.

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 about 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, the Dow Jones industrial
average (.DJI: Quote, Profile, Research) was up more than 200 points, or 1.7 percent.

“The package of (U.S.) data from this week points to a
stronger-than-consensus estimate for tomorrow,” said Quincy
Krosby, market strategist at Prudential Financial in Newark,
New Jersey, referring to a rise in non-farm payrolls.

On Wednesday, ADP data showed U.S. private-sector
employers added more jobs than forecast last month. In another
encouraging sign, a gauge of employment in a report on the
U.S. services sector on Thursday rose to a near five-year high
in February. [ID:nN02222564]

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.


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.

“Looks like profit taking and buying into the dip. 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:


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 was last at $1.3937, up 0.5 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]


In the U.S. stock market, the Dow Jones industrial average
(.DJI: Quote, Profile, Research) was up 209.72 points, or 1.74 percent, at 12,276.52.
The Standard & Poor’s 500 Index (.SPX: Quote, Profile, Research) was up 23.18 points, or
1.77 percent, at 1,331.62. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research)
was up 53.59 points, or 1.95 percent, at 2,801.66.

As stocks rose on the jobless claims data, U.S. bonds
fell. The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) was down 27/32,
its yield rising to 3.57 percent from 3.47 percent on
(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)