* Biggest drop in monthly US jobs report in 34 years
* Weak data spurs market rally on hopes for stimulus plan
* Mexico's Carstens says FX intervention will continue
By Daniel Bases
NEW YORK, Feb 6 (Reuters) - The shock waves of the grim U.S. jobs report on Friday were felt throughout emerging markets but the impact lifted asset prices rather than smash them down as investors bet the U.S. would pass a massive economic stimulus plan.
The plan now before the U.S. Senate, having already passed the House of Representatives, is expected to come to a vote later on Friday.
A moderate bloc of senators is trying to trim the $937 billion price tag. (For details click on [ID:nN05403943])
"The market moved up on the expectation of the stimulus package being passed," said Rafael de la Fuente, emerging markets analyst at BNP Paribas in New York.
Earlier on Friday, the U.S. employment report for January showed 598,000 jobs were cut by employers, the biggest monthly decline in 34 years. The unemployment rate rose to 7.6 percent. Both figures were worse than expected.
Emerging market stocks, bonds and currencies all gained ground, moving in tandem with a rally in U.S. equities.
MSCI's emerging markets stock index rose 4.23 percent .MSCIEF while the Latin American stock index gained 5.69 percent .MILA00000PUS.
Investors dumped U.S. dollars as the safe-haven bid evaporated on the hope the stimulus plan would help spur economic growth and spill over into emerging markets, boosting their currencies.
A third day of unannounced intervention by Mexico's central bank also helped lift the peso against the U.S. dollar.
Finance Minister Agustin Carstens told investors in New York that the central bank would continue to intervene in order to contain the volatility of the peso, which hit a record low against the greenback earlier this week.
Even as some market players argue the weak peso reflects the grim prospects for Mexico's stumbling economy, Carstens suggested the peso's recent volatility was due to speculators abusing daily dollar auctions introduced last October.
"Interventions are tricky and this is a big test that so far seems to be working. The market was learning how to play the daily intervention method and the bank had to change its strategy," said one Latin American analyst at a British bank in New York.
"Eventually the central bank is going to run out of ammunition. I think the peso will continue to trade weaker on the bad economic data. Intervention won't change the trend," the analyst, who spoke on condition of anonymity, said.
The peso rose 0.35 percent to 14.2149 per U.S. dollar MEX01MXN=.
Brazil's real rose 1.51 percent to 2.25 per U.S., a fourth consecutive day of gains BRBY. Traders said transaction volumes were low.
In the credit markets emerging sovereign debt yield spreads over weaker U.S. Treasuries narrowed by 11 basis points to 634 basis points, according to the JP Morgan Emerging Markets Bond Index Plus 11EMJ.JPMEMBIPLUS. (Additional reporting by Walter Brandimarte and Herbert Lash in New York; Lizbeth Salazar in Mexico City; Editing by Diane Craft)