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London - A forecast-busting US jobs survey on Friday eased concerns that the world's largest economy was slowing down, sending stocks and the dollar higher.
Worries about the US recovery's pace had grown over the past few days following a run of soft economic data. Commodity prices took the brunt of the sell-off amid worries of waning demand for crude, metals and raw materials.
In the event, investors breathed a sigh of relief after the Labour Department reported that the US economy generated a five year high 244 000 jobs during April, higher than expectations for a 185 000 increase. The pre-release talk had been that the figure may have been substantially lower.
"Recent US data has pointed to a slowdown in US economic activity so jobs growth above expectations was a surprise," said Neil MacKinnon, global macro strategist at VTB Capital.
In Europe, the FTSE 100 index of leading British shares was up 0.4% at 5 943 while Germany's DAX rose 1.2% to 7 466. The CAC-40 in France was 1.2% higher, too, at 4 052.
Wall Street was poised for solid gains at the open - Dow futures were up 0.8% at 12 664 while the broader Standard & Poor's 500 futures were up a similar rate at 1 346.
The jobs data gave the dollar a boost as they generated some talk that the US Federal Reserve may start raising borrowing costs sooner than the markets currently expect. However, the increase in the unemployment rate to 9% from 8.8% would likely prevent the Fed from raising interest rates anytime soon. The payrolls data and the unemployment rate are based on separate surveys.
"Even allowing for the rise in the unemployment rate, the trends in employment suggest the data is indeed strong enough to bring forward expectations of a first Fed rate hike by a few months," said Alan Ruskin, an analyst at Deutsche Bank.
The dollar has been buoyant against the euro over the past day after the European Central Bank's president Jean-Claude Trichet on Thursday signaled another rate hike was not likely next month.
That took the shine off the euro currency, which had pushed towards 18-month dollar highs on expectations the central bank would follow up April's first interest rate increase in nearly three years with another one in June.
Though a July rate rise to 1.5% from the current 1.25% is expected, the pause suggested to investors that the ECB may not be quite as optimistic over the pace of the economic recovery in Europe as it had previously been.
And if oil prices continue to slide, analysts said rate hike expectations could be pushed out even further.
"Certainly another drop in crude oil prices after the 13% drop this week to date would have greater implications for rate expectations in the eurozone and undermine the euro further still," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi UFJ.
By mid afternoon London time, the euro was down 0.3% at $1.4507. At one point on Thursday, it was trading over $1.49.
Elsewhere, the jobs data helped stem the selling pressure in oil markets. Benchmark crude oil for June delivery was down $1.88 at $97.92 a barrel in electronic trading on the New York Mercantile Exchange. Before the figures it had down by over $2.
On Thursday, oil had plunged $9.44 to settle at $99.80 a barrel, the biggest one-day percentage decline in more than two years.
Earlier in Asia, Japan's Nikkei 225 index slid 1.5% to 9 859.20. Investors worried about the renewed strength in the yen and its impact on exporters, which are already struggling with destroyed factories, severe parts shortages and power outages since a devastating earthquake and tsunami on March 11.
On Thursday, the dollar fell as low as 79.54 yen, sparking expectations of another intervention in currency markets by Japan. The dollar hasn't traded below 80 yen since March 18, when the world's richest nations intervened to weaken Japan's currency and soften the economic blow dealt by the earthquake.
Following the jobs data, the dollar was 0.5% firmer at 80.74 yen.
Elsewhere, South Korea's Kospi index dropped 1.5% to 2 147.45 and Hong Kong's Hang Seng index shed 0.4% to 23 159.14. Australia's S&P/ASX 200 was 0.2% down.
Mainland Chinese shares were mixed. The Shanghai Composite Index lost 0.3% to 2 863.89, while the smaller Shenzhen Composite Index gained 0.4% to 1 195.31.
