Stocks jumped and the dollar rallied on Friday after data showed U.S. job losses were less than expected in August, the second major report this week to ease fears the economy would slip back into recession.
However, data on U.S. services companies showed the sector grew at a rate that was below expectations in August, even as it rose for an eighth straight month, leading investors to pare riskier bets.
Crude oil retreated after briefly rising on the jobs report, and gold prices curbed losses of more than 1 percent to trade lower on the services sector data.
The U.S. dollar had rallied versus the yen after the U.S. payrolls report but also trimmed gains after an index of national services by The Institute for Supply Management fell, providing a mixed outlook for the economy.
What we're seeing here is that the recovery continues to bounce around. This supports our view that we're going to see a below-average recovery, though the jobs data earlier today made the case for a double-dip harder to make, said Channing Smith, vice president of Capital Advisors in Tulsa, Oklahoma.
Still, the majority of data we've seen points to a slower recovery, Smith said.
MSCI's all-country world index <.MIWD00000PUS> was up 0.8 percent on the day, and about 3.5 percent for the week -- its biggest weekly gain since the week ended July 11.
In midmorning, the Dow Jones industrial average <.DJI> was up 52.07 points, or 0.50 percent, at 10,372.17. The Standard & Poor's 500 Index <.SPX> was up 5.98 points, or 0.55 percent, at 1,096.08. The Nasdaq Composite Index <.IXIC> was up 14.52 points, or 0.66 percent, at 2,214.53.
U.S. Treasuries and German Bund futures pared losses on news of U.S. non-manufacturing sector, which lifted demand for safer haven government debt.
The benchmark 10-year Treasury note, down a full point earlier in the session, fell 20/32 in price to yield 2.70 percent after the ISM report.
September Bund futures rose to 132.02, gaining around 14 ticks after the release of the data but remained 70 ticks down on the day.
The safe-haven Japanese yen and Swiss franc weakened while higher-yielding currencies, such as the Australian dollar, gained as the employment report fanned expectations the U.S. labour market may not be as weak as many had feared.
Gains, as in other risk assets, were later pared.
The dollar was down against major currencies, with the U.S. Dollar Index <.DXY> down 0.32 percent at 82.202.
The euro was up 0.28 percent at $1.2861. Against the yen, the dollar was up 0.06 percent at 84.34.
Oil prices edged into positive territory on the jobs report, then pared gains to turn lower after the services sector data.
U.S. light sweet crude oil fell $1.29 to $73.73 a barrel. Spot gold prices fell $9.60 to $1,241.10 an ounce.
Asian stocks edged higher before the job report, with MSCI's regional stock index outside Japan <.MIAPJ0000PUS> up 0.3 percent. Japan's Nikkei <.N225> rose 0.6 percent, but was still down more than 13 percent for the year.
(Reporting by Wanfeng Zhou, Ellen Freilich in New York; Kirsten Donovan, Atul Prakash and Jan Harvey in London; Writing by Herbert Lash; Editing by Kenneth Barry)