Stocks jump on U.S. jobs data

By Walter Brandimarte

NEW YORK (Reuters) - U.S. and European stocks jumped and the dollar steadied on Thursday after better-than-expected U.S. jobs data bolstered investor confidence in the global economy, causing gold prices to retreat from all time-highs.

The number of U.S. workers filing new claims for jobless benefits fell more than expected last week to a 10-month low, while worker productivity surged at a 9.5 percent annual rate, improving the outlook for both the economy and inflation.

The more stable dollar put a damper on commodity prices in general. U.S. crude oil prices dropped as much as $1 per barrel, snapping a three-day rally, as investors adopted a cautious tone before Friday's key U.S. employment report.

Short-dated U.S. Treasury prices rose on the benign inflation outlook, which resonated with the U.S. Federal Reserve's pledge a day earlier to keep interest rates low for "an extended period."

Long-dated Treasury prices fell, however, on concerns about upcoming supply of bonds and as the positive news on the economy curbed the safe-haven bid for government debt.

Wall Street stock indexes closed about 2 percent higher, with the Dow closing about 10,000 for the first time in two weeks.

The surprising drop in new claims for U.S. jobless benefits helped, and created "some anticipation that maybe tomorrow's employment report may be better than expected," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto warned that Friday's key monthly U.S. employment report will be the real test for markets.