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GLOBAL MARKETS-Stocks hold gains after U.S. jobs data

Published 05/08/2009, 09:10 AM
Updated 05/08/2009, 09:16 AM
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* MSCI world equity index up 0.7 percent at 238.04

* Stocks maintain gains after U.S. jobs data; oil firm

* Euro hits one-month high vs dollar

By Natsuko Waki

LONDON, May 8 (Reuters) - World stocks held gains on Friday near this week's 2009 high and the euro hit a one-month high against the dollar while U.S. Treasuries edged up after a mixed U.S. employment report.

The U.S. economy lost 539,000 non-farm jobs last month, which was less than expected, while the unemployment rate soared in line with expectations to 8.9 percent, the highest since September 1983.

"It's a terrible number but an improvement relative to the very terrible numbers we had before," said Jay Mueller, senior portfolio manager at Wells Capital Management in Milwaukee.

"The big question is: has the peak in job losses (been) hit? I am somewhat sceptical that we have seen the absolute worst of it, but you can't rule that out."

TheMSCI world equity index was up 0.7 percent, largely unchanged from before the jobs data. The index has gained nearly 40 percent since mid-March and is up 4.6 percent on the year.

Equities and other risky assets have been firm after stress tests on 19 U.S. banks produced no big shocks. U.S. regulators ordered top banks to raise nearly $75 billion in capital, a sum which analysts said was relatively modest, to help them to withstand further shocks to the financial system.

"This (stress test result) could be seen by many as the last hurdle for the markets to continue their stellar bull run," said Chris Hossain, senior sales manager at ODL Securities.

"Markets tend to show where we should be in 18 months' time, and for the time being, a sense of optimism is in the air."

The FTSEurofirst 300 index was up 1.4 percent while emerging stocks added 0.9 percent.

Spreads between emerging sovereign bonds and U.S. Treasuries fell as low as 461 basis points for the first time since October 2008.

In a sign that money is coming out of the safe-haven bunker, fund tracker EPFR global said emerging market equity funds posted combined inflows of $3.6 billion in the week to May 6, and emerging market bond funds recorded their best week since early in the first quarter of 2008.

Crude oil prices rose 2.5 percent to $58.14 a barrel as expectations grew that the recovering global economy might boost energy demand.

The euro rose as high as $1.3505, up 0.7 percent, after the data. The dollar lost 0.75 percent against a basket of major currencies as flows seeking safety in the low-yielding U.S. currency waned.

"A sustainable recovery is not a given and a W-shaped outcome is as likely as this V-shaped recovery," said Chris Iggo, chief investment officer of fixed income at Axa Investment Managers, in a note to clients.

"However, the L-shape looks not to be the most likely outcome, to the disappointment of the doomsayers whose livelihood depends on spinning a bearish yarn and selling it to the very people whose ability to pay is ironically transposed to that scenario coming true."

The June bond futures were down 40 ticks while the yield curve steepened a day after the European Central Bank said it would buy 60 billion euros of covered bonds -- securities issued by banks and backed by mortgages and other loans -- and lend banks unlimited funds for up to 12 months.

The announcements came after the ECB cut interest rates to a record low of 1.0 percent on Thursday.

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