* US Feb payrolls rise; jobless rate lowest since April 09
* U.S. stocks, world stocks fall on oil gains
* U.S. dollar fails to benefit from jobs data (Updates prices)
By Caroline Valetkevitch
NEW YORK, March 4 (Reuters) - World stocks and the U.S. dollar dropped on Friday as oil prices rose on escalating tensions in Libya, offsetting a U.S. jobs report that reinforced views the economic recovery is becoming self-sustaining.
Gold advanced above $1,430 an ounce and U.S. Treasury debt prices gained as the Libyan turmoil drove investors to seek safe-haven assets.
U.S. crude oil prices jumped to their highest since September 2008, and Brent crude rose above $116 as Libyan security forces clashed with rebels near the major oil terminal of Ras Lanuf.
The MSCI all-country world stock index <.MIWD00000PUS> was down 0.08 percent, reversing earlier gains. On Wall Street stocks fell a day after posting their best one-day rise in three months.
"The rise in oil is a concern," said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "Businesses will absorb it or pass it along, and if they do, eventually the consumer has to pay more."
The U.S. government's monthly payrolls report showed strong jobs growth in February, but with the market having rallied on Thursday on expectations of solid hiring by private employers the data had a muted impact.
The Labor Department reported hiring by U.S. employers in
February hit the highest level since last May, and the
unemployment rate fell to 8.9 percent, an almost two-year low.
U.S. payrolls jump, jobless rate near 2-year low
[ID:nOAT004757]
INSTANTVIEW: [ID:nN04151654]
SNAP ANALYSIS: U.S. jobs data showing some consistency
[ID:nN04292473]
Reuters Insider-Strong Payrolls Data Puts Focus on Fed's QE
http://link.reuters.com/mub48r
Graphic- US payrolls:
http://r.reuters.com/rud48r
Graphic- US unemployment:
http://r.reuters.com/kud48r
The Dow Jones industrial average <.DJI> dropped 140.24 points, or 1.14 percent, to 12,117.96. The Standard & Poor's 500 Index <.SPX> fell 15.25 points, or 1.15 percent, to 1,315.72. The Nasdaq Composite Index <.IXIC> lost 23.73 points, or 0.85 percent, to 2,775.01.
The U.S. employment data did little to alter expectations that the Federal Reserve would maintain its loose monetary policy, driving down the dollar to a four-month low against a basket of major currencies.
The euro rose above the key psychological $1.40 mark and headed for its biggest weekly rise in six weeks. The single currency is on course to make a run toward $1.4283, a key resistance level reached last November, after European Central Bank President Jean-Claude Trichet strongly hinted on Thursday at an interest rate rise in April.
The U.S. dollar fell as low as 82.25 yen on EBS
"The focus in currency markets will remain on interest rate differentials, and that's been clearly on an upward trend in favor of the euro," said Paresh Upadhyaya, head of Americas G10 FX Strategy at BofA Merrill Lynch Global Research in New York.
In the U.S. government debt market the benchmark 10-year
note
Brent crude futures
"Tension in the Middle East is like a runaway train," said Michael Hewson, an analyst at CMC Markets. "Once it starts, it's very difficult to stop. And if there is a danger that it impacts the supply chain, people will understandably get nervous."
Investors worry rising oil prices could also affect demand for industrial metals, including copper.
Three-month copper on the London Metal Exchange
Spot gold
In the European stock market, the FTSEurofirst 300 <.FTEU3> was down 0.7 percent. (Additional reporting by Rodrigo Campos, Wanfeng Zhou in New York; and Jeremy Gaunt and Claire Milhench in London; Editing by Leslie Adler)