London - Stronger than expected US jobs figures helped stocks rally Thursday and helped investors brush off interest rate increases in China and Europe.
The euro, meanwhile, was helped by the European Central Bank's indication that it would increase its key rate again this year after its widely expected move to lift the rate by a quarter point to 1.5%.
The main driver in stock markets was a forecast-busting US jobs report and a decline in the number of weekly jobless claims. In combination, they have eased fears about Friday's government figures, which often set the tone in markets for a week or two after their release.
Private payrolls firm ADP reported that employers added 157 000 jobs in June, more than double estimates of around 70 000. Weekly jobless figures were also encouraging, with unemployment claims down 14 000 to 418 000.
"A solid 150 000 job gain in tomorrow's payrolls report now seems to be in the cards," said Robert Kavcic, an analyst at BMO Capital Markets.
The hope in the markets is that the recent soft patch in the US economic dataflow may have come to an end, providing the global economy with further impetus. Since stocks are a leading indicator of economic activity in the months ahead, there are many in the markets hoping that the second half of the year could see widespread gains.
In Europe, Germany's DAX was 0.9% higher at 7 496 while the CAC-40 in France rose 1.1% to 4 005. The FTSE 100 of leading British shares was up 1% at 6 065 after the Bank of England kept its main interest rate unchanged at a record low of 0.5%.
On Wall Street, the Dow Jones industrial average was up 0.6% at 12 708 while the broader Standard & Poor's 500 index rose 0.9% to 1 351.
Friday's payrolls figures could also potentially have a big impact in the currency market.
Ahead of their release, trading has been fairly lackluster though the euro garnered some support on continuing ECB rate hike expectations. While the ECB is carrying on raising rates, its peers, such as the US Federal Reserve and the Bank of Japan, are showing few signs of lifting their super-low borrowing costs anytime soon.
"The ECB stands apart from its major counterparts ... in taking pre-emptive action to avert possible second round inflation effects from high energy and food prices," said Michael Woolfolk, an analyst at the Bank of New York Mellon.
Trichet said the bank was "monitoring very closely" price developments -that's code in the markets that the tightening cycle was not over but that rates would not rise next month, or possibly the month after.
Regarding Europe's debt crisis, Trichet repeated the bank's insistence that Greece could not be allowed to default. The bank has significant exposure to Greek debt since it accepts Athens' bonds as collateral for loans that help keep the economy afloat.
The ECB has repeatedly insisted that a default on those obligations is out of the question.
By Thursday afternoon, the euro was more or less flat at $1.4325, having traded as much 0.6% lower before the upbeat US data and the ECB rate verdict.
Earlier in Asia, stocks eked out modest gains despite the People's Bank of China's decision Wednesday to raise interest rates once again as it tries to put a lid on inflation. However, the decision has not prompted many analysts to think that China's economy will slow down sharply. That's important as China, the world's second biggest economy, has been a major prop to the global recovery over the past couple of years.
Mainland Chinese shares were mixed. The benchmark Shanghai Composite Index lost 0.6 percent to finish at 2 794.27 while the Shenzhen Composite Index edged up 0.1% to 1 202.32.
Hong Kong's Hang Seng index closed marginally up at 22 530.18 while South Korea's Kospi was 0.4% higher to 2 180.59. Japan's Nikkei 225 dropped 0.1% to close at 10 071.14, a day after hitting its highest level since the country was battered by an earthquake and tsunami on March 11 that killed tens of thousands of people and sent the economy reeling.
Oil prices motored higher too. Benchmark oil for August delivery was up $1.77 at $98.42 a barrel in electronic trading on the New York Mercantile Exchange.