By Herbert Lash
NEW YORK (Reuters) - Global equity markets surged on Friday as investors set aside any fear of economic softness in a weak U.S. jobs report, while bond yields and the dollar fell as the data showed employers hired far fewer workers than expected in January.
Non-farm payrolls rose by 113,000, well below the consensus of 185,000, although the unemployment rate hit a five-year low of 6.6 percent, the U.S. Labor Department said.
The dollar fell broadly as safe-haven gold and U.S. government debt prices rose on the unemployment report. Equities also rose, with investors writing off the weakest two months of U.S. job growth in three years on inclement weather.
The household survey from which the jobless rate is derived also found strong gains in employment and an increase in the number of people in the labor force, helping offset concerns about a potential soft patch in the economy.
The proportion of working-age Americans with a job rose to 58.8 percent, the highest since October 2012.
"Markets are increasingly behaving as though the recent series of soft economic data is truly attributable to bad weather, and not some broader downturn in demand," said David Joy, chief market strategist at Ameriprise Financial in Boston.
"It's unlikely that the economic momentum from late last year simply stalled in December and January," Joy said.
U.S. gross domestic product grew by the most in a decade in the last half of 2013, the Commerce Department said last week.
MSCI's all-country stock index rose 1.09 percent, and its gauge of emerging markets rose 0.89 percent.
The pan-European FTSEurofirst 300 index of leading shares closed up 0.75 percent to 1,300.11, helped by steelmaker Arcelor, as investors bet equities would continue to benefit from the region's gradual economic rebound.
Arcelor rose 0.81 percent to 12.495.
On Wall Street, the Dow Jones industrial average rose 144.46 points, or 0.92 percent, to 15,772.99. The S&P 500 gained 20.67 points, or 1.17 percent, to 1,794.1 and the Nasdaq Composite added 63.331 points, or 1.56 percent, to 4,120.452.
"Expectations for the report were too high, and investors are giving the report the benefit of the doubt because of the weather," said Donald Selkin, chief market strategist at National Securities in New York.
After the selloff earlier in the week, the fact equities are rising after Thursday's gains shows there is still momentum to the bull market, Selkin said.
"Stocks initially got killed after the report came out, but now we're pretty sharply higher. That's a strong sign that we've bottomed out," he said.
Though the labor market report called into question the strength of the economy, the preponderance of most economic data still shows some pretty good growth, said Anthony Valeri, investment strategist at LPL Financial in San Diego.
"We're seeing earnings on track to grow about 9 percent year-over-year, and as long as that's the case, the pullback in stocks is likely to be limited," Valeri said.
"The data hasn't been weak enough to suggest that the current earnings trajectory will deviate," he said.
Earnings have been holding up.
Of the 343 companies in the S&P 500 that have reported earnings to date for last year's fourth quarter, 67.9 percent beat analyst expectations, Thomson Reuters data show. In a typical quarter since 1994, 63 percent beat estimates.
The dollar index fell 0.26 percent to 80.694, as the euro gained 0.29 percent to 1.3628 against the greenback. The dollar rose 0.24 percent to 102.33 against the yen.
The benchmark 10-year U.S. Treasury note rose 7/32 in price, pushing its yield down to 2.6765 percent.
German Bund futures settled up 50 ticks at 143.83, retreating from earlier highs of 144.02, while cash 10-year yields on government debt fell to 1.66 percent.
Oil rose by more than $1 to one-month highs, fueled by a sharp rally in gasoline and heating oil as supplies tightened and refiners started to shut down plants for maintenance.
Brent crude oil futures rose $2.20 to $109.39 a barrel. U.S. crude settled up $2.04 to $99.88 a barrel.
U.S. unemployment: http://link.reuters.com/wam54t
Nonfarm payrolls: http://link.reuters.com/byw66v
U.S. payrolls gap: http://link.reuters.com/kem54t
(Additional reporting by Blaise Robinson in Paris, Reporting by Herbert Lash; Editing by Chris Reese, Andrew Hay and Nick Zieminski)