Jobs data keeps stocks higher, dollar steady

Better-than-expected U.S. jobs data helped buoy European stocks and put Wall Street on track for a positive open on Friday, while the dollar gained.

The U.S. Labor Department said employers cut a fewer-than-expected 216,000 jobs in August, although the unemployment rate rose to a 26-year high of 9.7 percent from 9.4 percent.

Analysts had expected non-farm payrolls to drop 225,000 in August and the unemployment rate to rise to 9.5 percent.

MSCI's all-country world stock index was up about 0.3 percent, but still looked set to end the week lower. If it does, it will be the first loss eight weeks and only the fifth since the March rally began.

Some investors have begun to pull back from equity markets, expecting a correction after so many months of gains. Fund tracker EPFR Global said, for example, that flows into equity funds stalled in the latest week.

But other remain bullish. Both UBS and Goldman Sachs said they were raising their year-end targets for European stocks.

The FTSEurofirst 300 index of top European shares was up 1.2 percent after the jobs data. It is up 48 percent since a record low in March, but is still down about 17 percent from a year ago, just before the collapse of Lehman Brothers that accelerated the global credit crisis.

"I would not be too discouraged about the unemployment rate. What I would take encouragement from is the fact is the trend in the rate of decline in jobs is still improving," said Nigel Gault, chief U.S. economist at IHS Global Insight.

Earlier, Japan's Nikkei lost 0.27 percent.

The G20 was meeting in London, where finance ministers were expected to discuss the continuing role of governments in combatting global economic decline.

WAITING FOR JOBS

The dollar was slightly higher against major currencies, holding above a seven-week low hit earlier in the week against the yen.

The euro was down 0.1 percent at $1.4232 and the dollar gained 0.4 percent against the yen to 92.98 yen.

On euro zone government debt markets, the interest rate-sensitive two-year Schatz yield was 1.128 percent, down three basis points.