GLOBAL MARKETS-World stocks fall, dollar eases as oil gains

* 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, adds details)

By Caroline Valetkevitch

NEW YORK, March 4 (Reuters) - World stocks and the U.S. dollar fell on Friday as oil prices rose on escalating tensions in Libya, offsetting a U.S. jobs report that showed the economic recovery shifting up a gear.

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 0.3 percent. On Wall Street, stocks fell a day after posting their best one-day rise in three months.

"The (market) battle is: has the economy turned in a permanent way, or are higher oil prices going to slow everything down," said Bernie McGinn, president at McGinn Investment Management in Alexandria, Virginia.

The U.S. jobless rate unexpectedly fell and employers added 192,000 jobs. But the market rallied on Thursday on expectations of solid hiring by private employers so the data had a muted impact.

The Labor Department reported hiring by U.S. employers in February hit the highest level since last May as unemployment dipped to 8.9 percent, an almost two-year low.

U.S. payrolls jump, jobless rate near 2-year low

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INSTANTVIEW: [ID:nN04151654]

SNAP ANALYSIS: U.S. jobs data showing some consistency

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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> was down 166.27 points, or 1.36 percent, at 12,091.93. The Standard & Poor's 500 Index <.SPX> was down 17.25 points, or 1.30 percent, at 1,313.72. The Nasdaq Composite Index <.IXIC> was down 27.18 points, or 0.97 percent, at 2,771.56.

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

Ratings agency Fitch's revision of its outlook for Spain's sovereign credit rating to negative caused the euro to pare some gains, however.

"(Fed Chairman Ben) Bernanke may be relieved to see another month of improvement in the unemployment rate, but given the underlying weakness of the report, the central bank will still argue that unemployment remains extremely high and therefore continued stimulus could be warranted," said Kathy Lien, director of currency research at GFT in New York.

In the U.S. government debt market the benchmark 10-year note was up 19/32 in price, its yield easing to 3.48 percent from 3.56 percent late on Thursday.

Brent crude futures for April delivery were last up $1.22 at $116.01 a barrel. Brent oil has risen about 15 percent since the end of January.

"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 fell to $9,895 a tonne, from a last bid of $9,910 a tonne on Thursday.

Spot gold hit a high of $1,431.85 an ounce and was up 1.1 percent at $1,430.70.

In the European stock market, the FTSEurofirst 300 <.FTEU3> was down 0.6 percent. (Additional reporting by Rodrigo Campos, Wanfeng Zhou in New York; and Jeremy Gaunt and Claire Milhench in London; Editing by Leslie Adler and Andrew Hay)