GLOBAL MARKETS-US stocks rally on oil's dip, job data; euro up

* Oil falls on Chavez's Libya mediation proposal

* World stocks rise as oil dips

* Jobless claims boost U.S. stocks

* ECB buoys euro with inflation comments (Adds details on European stocks)

By Caroline Valetkevitch

NEW YORK, March 3 (Reuters) - Wall Street scored its best one-day rally in three months on Thursday, due to a pullback in oil prices and upbeat labor market data, while the euro jumped on the European Central Bank president's inflation warning.

Data showing new U.S. claims for unemployment benefits fell last week to their lowest level in more than 2-1/2 years represented the latest optimistic reading to bolster hopes for an upside surprise in Friday's key payrolls report.

"There are still concerns about high oil prices, but the bottom line is: The U.S. economy is improving. We continue to get confirmations of that, and it's a good sentiment heading into Friday's numbers," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

ECB President Jean-Claude Trichet's comments on inflationary risks were widely expected, but he surprised investors by saying the bank may raise interest rates as soon as next month.

The heightened concerns about inflation followed months of sharp gains in oil and other commodities, with Brent crude oil up roughly 15 percent since the end of January.

The latest batch of purchasing managers' indexes (PMI) in Europe and elsewhere suggested fast-building inflationary pressures. For details, see [ID:nLDE7220L8]

World stocks as measured by the MSCI Index <.MIWD00000PUS> rose 1.1 percent.

On Wall Street, both the blue-chip Dow Jones industrial average <.DJI> and the benchmark Standard & Poor's 500 index <.SPX> posted their biggest one-day gains since Dec. 1.

OIL EASES

Oil prices fell after Venezuela President Hugo Chavez made a proposal to broker a peace deal in Libya.

Some oil analysts suggested the Chavez proposal was a convenient excuse for traders to adjust their positions.

"The market was a little overstretched to the upside, and the Chavez peace proposal gave traders a reason to square positions," said Tom Bentz, broker at BNP Paribas Commodities Futures Inc in New York.

Brent crude oil fell $1.56 to settle at $114.79 a barrel. On Wednesday, crude approached 2-1/2-year highs as violence escalated in oil producer Libya.

On the New York Mercantile Exchange, April crude fell 32 cents, or 0.31 percent, to settle at $101.91 a barrel.

Investors worry if it is not halted soon, the political instability could spread to major oil producer Saudi Arabia, a central U.S. ally in the region, and other oil suppliers.

Global and euro zone services PMI graphic:

http://r.reuters.com/vax38r

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WALL ST JUMPS ON ENCOURAGING JOB DATA

Earlier this week, ADP data showed U.S. private-sector employers added more jobs than forecast last month.

In another sign of improvement in the labor market, a gauge of employment in a report on the U.S. services sector on Thursday rose to a near five-year high in February. [ID:nN02222564]

The non-manufacturing index rose to 59.7 in February, slightly above forecasts and higher than the January result. [ID:nEAP101300]

A Reuters survey for Friday's February jobs report shows nonfarm payrolls probably increased by 185,000 after snowstorms held growth to a paltry 36,000 jobs in January. The survey was conducted before data on Monday showed strong factory hiring, which prompted some economists to rethink their forecasts. [ID:nN02222564]

Market sentiment was leaning toward a number above 200,000, traders said.

The Dow Jones industrial average <.DJI> gained 191.40 points, or 1.59 percent, to end at 12,258.20. The S&P 500 rose 22.53 points, or 1.72 percent, to finish at 1,330.97. The Nasdaq Composite Index <.IXIC> jumped 50.67 points, or 1.84 percent, to close at 2,798.74.

The broad S&P 500 is down only about 1 percent from a peak in late February after falling around 3 percent due to the violence in Libya.

As stocks rose on the jobless claims data, U.S. bonds fell. The benchmark 10-year note was down 23/32, its yield rising to 3.56 percent from 3.47 percent on Wednesday.

In Europe, the pan-European FTSEurofirst 300 <.FTEU3> share index closed 0.2 percent higher at 1,155.94 points.

EURO GAINS, GOLD SLIPS

The euro gained against the U.S. dollar to a fresh four-month high. It climbed as high as $1.3976 on trading platform EBS, and and was at $1.3963 -- up 0.7 percent on the day.

Gold prices fell on Trichet's comment. Spot gold , which hit a record high this week, dropped as low as $1,411.52 an ounce on Thursday.

Trichet said the ECB will exercise "strong vigilance" over rising inflation. For Trichet's comments see [ID:nLOOKCBANK] (Reporting and writing by Caroline Valetkevitch; Additional reporting by Robert Gibbons, Wanfeng Zhou, Angela Moon and Edward Krudy in New York; Jeremy Gaunt in London; Editing by Jan Paschal)