Euro gains, shares pare losses after U.S. data

NEW YORK (Reuters) - The euro edged higher against the dollar and global equity markets pared losses on Friday after data showed U.S. jobs growth slowed in August, raising chances that interest rates will stay low for a longer period than investors had expected.

The dollar fell after data showed U.S. non-farm payrolls grew by only 142,000 last month, far below the 225,000 increase forecast by analysts in a Reuters poll. The July figure was revised upward to 209,000.

The FTSEurofirst 300 index of top European shares cut some losses to close down 0.35 percent at 1,396.02, after falling as low as 1,391.39 earlier in the session. But Germany's DAX and Spain's IBEX indexes closed higher.

MSCI's all-country index fell 0.18 percent, while the Dow and S&P 500 rebounded to trade slightly higher.

Investors took the surprisingly weak data as a sign the Federal Reserve will not boost rates anytime soon.

"One of the big fears of this market, maybe the only fear, has been rapidly rising interest rates. This puts an end to those thoughts in the near term," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

Mohamed El-Erian, chief economist at Allianz in Newport Beach, California, said although the payrolls report was disappointing, it was more solid in key components, such as improvement in the unemployment rate to 6.1 percent.

"All this will reinforce the Federal Reserve's 'steady as she goes' policy approach," El-Erian said.

The Dow Jones industrial average rose 11.91 points, or 0.07 percent, at 17,081.49. The Standard & Poor's 500 Index was up 1.74 points, or 0.09 percent, at 1,999.39. The Nasdaq Composite Index was down 1.57 points, or 0.03 percent, at 4,560.72.

The greenback scaled back from a nearly six-year high against the yen in early trading, and the euro recovered from a 14-month low against the dollar a day after a surprise rate cut from the European Central Bank.

The euro edged up 0.09 percent against the dollar at $1.2956 after shedding 1.6 percent on Thursday, its steepest fall in almost three years, after the ECB cut rates to record lows to avert deflation.

On the EBS trading system, the dollar last traded down 0.31 percent at 104.93 yen after it touched a nearly six-year high of 105.71 yen in Asian trading.

Yields on Italian, Irish and Spanish bonds hit all-time lows in a broad-based rally in euro zone debt spurred by the ECB's rate cuts and openness to a large-scale bond-buying program.

The 10-year U.S. Treasury note rose 5/32 in price to yield 2.4301 percent.

Brent crude oil fell below $101 a barrel as a strong dollar depressed demand and the jobs data report suggested the U.S. economy was growing more slowly than expected.

Oil prices on both sides of the Atlantic had fallen on Thursday as the ECB rate cut led to a spike in the dollar, making it more expensive for holders of other currencies to buy the dollar-denominated commodity.

Brent was down $1.27 at $100.56 a barrel. U.S. crude was $1.34 lower at $93.11 a barrel.

(Reporting by Herbert Lash; Additional reporting by Atul Prakash in London; Editing by Dan Grebler)