By Atul Prakash
LONDON (Reuters) - The euro hit a session high against the dollar and European shares pared losses on Friday after data showed U.S. jobs growth slowed in August, raising chances that rates will stay low for a longer period than markets had expected.
The dollar fell after data showed non-farm payrolls grew by 142,000 last month, far below the 225,000 increase forecast by analysts in a Reuters poll. The July figure was revised upwards to 209,000.
The FTSEurofirst 300 index <.FTEU3> of top European shares was down 0.4 percent at 1,394.63 points after falling as low as 1,391.39 points earlier in the session.
"Equity traders are loving this rotten number as this confirms the view of (Fed Chair) Janet Yellen, who has been beating the drums of slack in the economy," said Naeem Aslam, chief market analyst at AVA Trade.
"What this confirms is that rates are not going up any time soon, or at least not this year, which is what many had started to price in."
The recovery in European shares came after Russian news agency Interfax quoted a source saying Ukraine and pro-Russian rebels had signed an agreement on a ceasefire in eastern Ukraine. There was no immediate confirmation of the deal.
The euro strengthened against the dollar
U.S. short-term interest-rate futures contracts rose after the jobs data. The contracts showed markets were now assigning a roughly 68 percent chance of a first Fed rate hike in July 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts.
(Editing by Catherine Evans)
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