Global stocks rose and the dollar rallied broadly on Friday after a robust U.S. labour market report beat expectations and provided another sign the world's biggest economy is recovering.
Strong acceptance from private creditors for a Greek bond swap averted a messy default and added to a slightly bullish mood, but the losses forced on the debt holders also triggered the payment of insurance contracts.
A ruling by the International Swaps and Derivatives Association that a credit event had occurred cut into gains on Wall Street and pared losses in the bond market. The euro fell further, but the announcement was widely expected and the single currency snapped back to recoup rebounded a tad.
U.S. employment grew solidly for a third straight month in February as employers added 227,000 jobs to their payrolls, the Labor Department, even though the unemployment rate held at a three-year low of 8.3 percent.
The data offered encouragement for those who see the U.S. economy moving into a more sustainable stage of recovery that could lead the Federal Reserve to drop its easy money stance earlier that the market now perceives.
If this trend continues then clearly there'll be a translation of good economic news to the outlook for Fed policy, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
We'll begin to spark debate about the Fed exiting its ultra-accommodative policy stance sooner than expected, he said.
The dollar hits its highest level against the yen in nearly 11 months and rallied broadly against other currencies, while safe-haven government debt prices fell. Gold reserved early sharp losses to rise nearly 1 percent in heavy trading.
The Dow Jones industrial average <.DJI> closed up 14.08 points, or 0.11 percent, at 12,922.02. The Standard & Poor's 500 Index <.SPX> added 4.96 points, or 0.36 percent, at 1,370.87. The Nasdaq Composite Index <.IXIC> gained 17.92 points, or 0.60 percent, at 2,988.34.
For the week, the Dow fell 0.4 percent, the S&P 500 rose 0.1 percent and Nasdaq gained 0.4 percent.
Three years ago on Friday marked the depth of market lows brought on by the financial crisis. The S&P 500 now is trading at levels last seen in June 2008, before Lehman's collapse later that fall spent markets into a downward spiral. It is still 200 points below its all-time high set in October 2007.
European shares rose, supported by the U.S. labor market report. Data from the United States and emerging markets has become a key driver for European companies, which face lacklustre domestic growth, as underscored by Friday's weaker-than-expected industrial output from France, Italy and Britain.
The FTSE Eurofirst 300 <.FTEU3> index of top regional shares closed up 0.4 percent at 1,079.37 points.
The U.S. data lifted the dollar broadly to multi-month highs against other currencies and initially pushed commodity prices lower. Crude oil futures later rebounded, as the data countered dollar pressure and fading euphoria over Greece's debt swap.
The pace of job growth we've seen in the last six months is steadier and at a higher level than we saw a year ago, said Alan Levenson, chief economist at T. Rowe Price in Baltimore.
The bottom line to me is I think the economy is on firmer footing than it was a year ago, he said.
Graphic for payrolls: http://link.reuters.com/dan96s
Graphic for unemployment: http://link.reuters.com/han96s
The dollar rose against a basket of major currencies, with the Dollar Index <.DXY> up 1.1 percent at 79.993.
But the euro tumbled more than 1 percent against the dollar on concern about the heavily indebted euro zone and its weak growth outlook, which outweighed relief over the Greek bond swap. The euro was trading at about $1.3114.
Trading activity, however, was moderate and many market participants are still sitting on the sidelines, according to Michael Woolfolk, currency strategist at BNY Mellon in New York.
I think there is cautious optimism, but I think the European debt crisis is one of the factors that's keeping people from going all in.
Global stocks, as measured by the MSCI world equity index <.MIWD00000PUS> were up 0.1 percent at 329.40.
Brent crude futures settle up 54 cents at $125.98 a barrel. U.S. light sweet crude oil rose 82 cents to settle at $107.40 a barrel.
Safe-haven U.S. and German government debt fell. The benchmark 10-year U.S. Treasury note was down 4/32 in price to yield 2.03 percent.
Spot gold prices rose $13.15 to $1,713.40 an ounce.
U.S. gold futures for April delivery settled up $12.80 at $1,711.50 an ounce,
(Additional reporting by Emily Flitter, Rodrigo Campos, Robert Gibbons and Julie Haviv in New York; Reporting by Herbert Lash; Desking by Andrew Hay)