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GLOBAL MARKETS-Global equities climb, dollar drops as U.S. jobs data ease inflation fright

* U.S. nonfarm payrolls disappoints at 559,000

* Stronger reading would have prompted stimulus cut fears

* Indexes: Dow up 0.34%, S&P rose 0.65%; Nasdaq gains 1.23%

* Global asset performance tmsnrt.rs/2yaDPgn

* World FX rates tmsnrt.rs/2egbfVh (Recasts, adds quotes, details throughout; changes byline, dateline, previous LONDON)

WASHINGTON, June 4 (Reuters) - Global stocks, oil and gold rallied while the dollar fell on Friday, after U.S. nonfarm payrolls data showed hiring increased in May as the coronavirus pandemic eased, but not quite as much as expected, tempering expectations the Federal Reserve will tighten monetary policy sooner, rather than later.

The hotly anticipated U.S. nonfarm payrolls data showed 559,000 jobs created in May, a sharp increase in hiring from April but below the 650,000 expected from a Reuters poll of analysts.

The pan-European STOXX 600 index rose 0.38% after hitting a record high touched earlier this week, while MSCI’s gauge of stocks, which tracks shares in 50 countries across the globe, gained 0.60%.

A stronger-than-expected reading would have heightened worries that the robust economic recovery could push the Fed to contemplate paring back its bond buying and raising interest rates.

“This lower payrolls number should keep investor concerns about inflation muted – as long as the job market remains depressed, it’s hard to see wage inflation jumping higher,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. Zaccarelli added that there may be some lingering concerns about overall price inflation as the Fed keeps rates lower for longer amid unprecedented fiscal stimulus.

Market whispers had been for a stronger number, analysts said.

On Wall Street, the Dow Jones Industrial Average rose 116.06 points, or 0.34%, to 34,693.1, the S&P 500 gained 27.38 points, or 0.65%, to 4,220.23 and the Nasdaq Composite added 166.80 points, or 1.23%, to 13,781.30.

U.S. Secretary Marty Walsh in an interview with CNBC on Friday welcomed a “good, solid” jobs report and predicted more Americans would get back to work in the next couple of months as the pandemic wanes with increased vaccinations.

The dollar index fell 0.365%, with the euro up 0.33% to $1.2164, down from a multiweek high hit earlier on Friday.

Latin American currencies firmed, with Mexico’s peso, which gained 1.19% versus the U.S. dollar at 19.91, set for its biggest one-day gain in three weeks and Brazil’s real near six-month highs.

The greenback had rallied on Thursday, notching up its biggest daily gain in a month, after weekly U.S. jobless claims fell below 400,000 for the first time since the pandemic started more than a year ago and private payrolls increased by significantly more than expected.

Meanwhile, new orders for U.S.-made goods fell more than expected in April as a global semiconductor shortage weighed on the production of motor vehicles and electrical equipment, appliances and components.

The Commerce Department said on Friday that factory orders dropped 0.6% in April after increasing 1.4% in March. Economists polled by Reuters had forecast factory orders slipping 0.2%. Orders surged 14.2% on a year-on-year basis.

Manufacturing, which accounts for 11.9% of the U.S. economy, is being supported by a shift in demand toward goods from services during the pandemic. But the strong demand is straining supply chains.

Benchmark 10-year Treasury notes last rose 16/32 in price to yield 1.5738%, from 1.627%, while euro zone bond yields edged lower with investors looking for cues about the Fed’s bond-buying tapering discussions.

President Joe Biden will meet with the main Republican negotiator on infrastructure spending later on Friday, as they try to hash out a deal that can satisfy both camps.

Meanwhile, Fed chair Jerome Powell told an audience on Friday that “climate change is not something we directly consider in setting monetary policy” as he discussed on how the financial sector might address climate risks.

TAPER TALK

While Fed officials have consistently said they expect current inflationary pressures to be transitory and for ultra-easy monetary policy to stay in place for some time, they are also increasingly touting the need to at least start talking about a tapering of stimulus.

Investors have been carefully parsing the economic data to gauge whether inflation could prove sticky enough to force the Fed’s hand on tapering.

“Will prolonged, low-wage inflation allow for a longer period of low, overall price inflation to reign? Or will a Fed that is slow to raise rates - because they are concerned about a weak labor market - create a higher-than-expected overall inflation regime? It’s hard to know in advance, but we are all watching the experiment in real time and the consequences for all of us are high,” added Independent Advisor Alliance’s Zaccarelli.

Last month, much-lower-than-expected nonfarm payrolls numbers knocked back those expectations, weakening Treasury yields and the dollar, and the pattern repeated on Friday.

Spot gold added 1.2% to $1,893.04 an ounce after a 2% tumble on Thursday, its biggest since February.

U.S. crude recently rose 0.54% to $69.18 per barrel, trading close to a two-year high as OPEC+ supply discipline and recovering demand countered concerns about patchy COVID-19 vaccination rollouts around the globe. Brent was at $71.57, up 0.36% on the day.

Reporting by Katanga Johnson in Washington; editing by Jonathan Oatis

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