Dollar, stocks rise after U.S. jobless data

By Herbert Lash

NEW YORK (Reuters) - The dollar rose and global stocks edged higher on Thursday, led by Wall Street, after weekly U.S. jobless claims data suggested an improving labour market, though investors kept an eye on the ongoing impasse in budget and debt negotiations in Washington.

The Dow and benchmark S&P 500 index snapped a five-day losing streak after the Labor Department said the number of Americans filing new claims for unemployment benefits fell last week to near a six-year low.

The Nasdaq closed just shy of highs last seen almost 13 years ago, after the tech bubble burst.

The data eased some concerns about the U.S. economy that were spurred by the Federal Reserve's decision last week to keep its stimulus program intact, to the surprise of many investors. The jobs data could support the Fed's plan to begin winding that program down.

"The sky is not falling, things are picking up," said Chris Rupkey, managing director and chief financial economist at Bank of Tokyo-Mitsubishi UFJ. "A very good monthly jobs report is out there somewhere on the horizon. The Fed may have to wind down and exit these policies quicker than they think."

Also on Thursday, the U.S. government left its estimate for economic growth in the second quarter unchanged at 2.5 percent, while contracts to buy previously owned U.S. homes fell for a third straight month in August, a nagging reminder for some of the economy's less-than-robust health.

A measure of global equity markets, MSCI's all-country world index traded near break-even, up 0.15 percent, while the FTSEurofirst 300 index of leading European shares closed up 0.05 percent at 1,257.53.

On Wall Street, the Dow Jones industrial average closed up 55.04 points, or 0.36 percent, at 15,328.30. The Standard & Poor's 500 Index rose 5.90 points, or 0.35 percent, at 1,698.67. The Nasdaq Composite Index climbed 26.33 points, or 0.70 percent, at 3,787.43.

The dollar advanced as the euro was hurt by political uncertainty in Italy. Allies of scandal-ridden former Prime Minister Silvio Berlusconi renewed threats to bring down Italy's coalition government if Berlusconi is barred from politics as part of his punishment for tax fraud.

The euro was down 0.33 percent at $1.3481.

Against the yen, the dollar was up 0.49 percent at 98.90 yen.

But the dollar's gains and the jump in U.S. stocks are expected to be limited because the impasse in congressional negotiations over increasing the federal borrowing limit could lead to a possible U.S. debt default.

Republicans and Democrats also are at odds over passing other legislation to provide stop-gap funding for federal agencies that would avert a government shutdown on October 1.

House of Representatives Speaker John Boehner urged his caucus on Thursday to show flexibility over a measure to keep the government open, a fellow Republican said.

Lawmakers have given themselves very little time to come up with an agreement, said Art Hogan, managing director at Lazard Capital Markets in New York.

"I hope it doesn't take a big (market) slide to get them to say 'this is what happens when we mess up,'" Hogan said.

U.S. Treasuries prices slipped on the stronger jobless claims data.

Benchmark 10-year Treasury notes, down 2/32 in price before the report was issued, fell 6/32 afterward to yield 2.6462 percent.

Gold edged lower after the dollar firmed. Spot gold, steady above $1,330 before the jobless report, fell 0.7 percent to $1,323.91 an ounce.

U.S. Comex gold futures settled down $12.10 an ounce at $1,324.10.

Oil prices rose despite easing political worries about Iran and an improving supply picture as traders sought bargains after sharp losses earlier this month.

Brent oil gained 89 cents to settle at $109.21 a barrel, while U.S. crude futures settled 37 cents higher at $103.03 a barrel.

On top of concern about the timing of a change in monetary policy, dealers focused attention on the budgetary and debt battles going on in Washington.

Congress is struggling to pass a spending bill to keep the U.S. government funded beyond October 1, but a fight is expected over raising the debt limit.

U.S. Treasury Secretary Jack Lew warned that the United States would exhaust its borrowing capacity no later than October 17, though analysts reckon the federal government could keep paying its debts at least until the end of the month.

Elsewhere, data from the European Central Bank showed that lending to companies fell in all of the euro zone's big countries in August, highlighting the questionable strength of the currency bloc's economic recovery.

(Additional reporting by Marc Jones in London, and Ellen Freilich and Rodrigo Campos in New York; Editing by Kenneth Barry, Leslie Adler and Bernadette Baum)