GLOBAL MARKETS-Stocks fight off losses. dollar softens

* U.S. sees 85,000 jobs lost in December

* Global stocks teeter near highs after U.S. report

* U.S. dollar slips, rate views soften

*

(Updates with U.S. close)

By Al Yoon

NEW YORK, Jan 8 (Reuters) - World stocks teetered near 15-month highs and the U.S. dollar fell on Friday after a soft U.S. employment report tempered expectations for a global economic recovery.

The U.S. jobs report reminded investors unemployment will likely offset strength in manufacturing, services and housing in the world's largest economy. It still supported views of a modest recovery, however.

Stocks managed slight gains after wobbling earlier in the day. The Dow Jones Industrial Average <.DJI> rose 11.33 points, or 0.11 percent, to 10,618.19 and the Standard & Poor's 500 Index <.SPX> edged higher by 3.29 points, or 0.29 percent, to 1,144.98. The pan-European FTSEurofirst 300 index <.FTEU3> gained 0.46 percent to 1,065.03.

World stocks measured by the MSCI All-Country World Index <.MIWO00000PUS>, rose 0.7 percent to a fresh 15-month high.

"The data shows that while the U.S. economy is improving, the road to recovery is still going to be bumpy, and this has wide implications for the global economy," said Henk Potts, an analyst at Barclays Wealth.

U.S. employers unexpectedly cut 85,000 jobs in December, keeping the unemployment rate at 10 percent and cooling optimism over the labor market [ID:nN0747110]. Analysts polled by Reuters had expected nonfarm payrolls to be unchanged last month with the unemployment rate edging up to 10.1 percent.

But the Labor Department also said November payrolls were revised to show the economy added 4,000 jobs, compared with the 11,000 loss first reported.

"The layoffs are abating, which is the main concern, and what's left in industry can produce efficiently and make our economy grow," said Keith Springer, a financial advisor with Capital Financial Advisory Services in Sacramento, California.

U.S. stocks reversed losses though as shipping company United Parcel Service Inc boosted its fourth-quarter outlook and said it will cut 1,800 management and administrative jobs. [ID:nN08232945].

UPS shares rose 4.8 percent to $60.17. Rival FedEx Corp added 2.5 percent to $84.99. UPS and FedEx are economic bellwethers since they reflect business and consumer spending.

In currency markets, the U.S. dollar edged lower as the employment report reversed some expectations the Federal Reserve would raise short term interest rates around mid year.

"People are looking at that as an opportunity to buy back the dollar," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey.

The dollar declined against a basket of major trading-partner currencies, with the U.S. Dollar Index <.DXY> off 0.58 percent at 77.464. Against the Japanese yen, the dollar fell 0.7 percent to 92.66 yen, and the euro rose 0.65 percent to $1.4411.

Safe-haven government bonds, which had been weighed down on speculation a recovery would be strong enough to ignite inflation, ended little changed after an earlier rebound. Expectations the Fed will keep its benchmark rate steady helped short-term bonds.

Yields on benchmark 10-year U.S. Treasury notes rose by 0.01 of a percentage point to 3.84 percent.

In energy and commodities prices, U.S. light sweet crude oil rose 18 cents, or 0.22 percent, to $82.84 per barrel,, and spot gold prices rose $4.70, or 0.42 percent, to $1136.60.

(Additional reporting by Simon Falush in London and Gertrude Chavez-Dreyfuss and Chuck Mikolajczak in New York; Editing by Andrew Hay)