World stocks edged higher on Friday and registered their biggest weekly advance since March 2009 as data showed a drop in the U.S. jobless rate, while the euro fell after four days of gains.
The jobs data supported the view that the U.S. economy would avoid another recession, even as Europe battles its debt crisis.
Markets have posted strong gains after central bank moves earlier this week cut funding costs for banks. Signs that euro zone policymakers are working hard to resolve a compromise deal ahead of a December 9 summit, viewed as make-or-break for the 12-year old single currency bloc, also lent support.
World stocks on the MSCI all-country index <.MIWD00000PUS> were up 0.2 percent, off their highs of the day. The index ended the week up about 8 percent, its biggest weekly percentage gain since March 2009.
U.S. stocks also registered their best week since March 2009, with the benchmark Standard & Poor's 500 up 7.4 percent for the week.
On the day, U.S. stocks ended mostly flat. They gave up most of the 1-percent gains posted earlier in the session as traders booked profits after the S&P failed to break through technical resistance near its 200-day moving average.
The Dow Jones industrial average <.DJI> ended down 0.61 point, or 0.01 percent, at 12,019.42. The Standard & Poor's 500 Index <.SPX> was down 0.30 point, or 0.02 percent, at 1,244.28. The Nasdaq Composite Index <.IXIC> added 0.73 point, or 0.03 percent, at 2,626.93.
An index of European stocks <.FTEU3> ended up 1 percent.
The U.S. government said the economy created 120,000 jobs last month, while the jobless rate dropped to a 2-1/2 year low of 8.6 percent, further evidence the economic recovery was gaining momentum.
The data follows other supportive data on the U.S. economy this week, including a report Thursday that showed U.S. manufacturing activity rose to its highest level in five months. Labour, however, has been the weakest area of the U.S. economy.
It's becoming clearer and clearer to investors that the U.S. can, in fact, do fine even if Europe goes into recession and even if the European crisis continues to unfold. I think that's what we're seeing in the data, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $13 billion.
In currency markets, the euro fell against the dollar for the first time in five sessions.
Investors were hesitant to go overly long the euro ahead of the weekend and key event risks next week.
The euro fell as low as $1.33630, blowing through stops at $1.34150. It was last at $1.3398 on trading platform EBS, down 0.5 percent on the day. It rose to a 10-day high of $1.35505 immediately after the U.S. non-farm payrolls report.
Much caution remains in markets overall. Traders cited speculation about a possible downgrade of Spain's credit rating.
The European Central Bank is expected to cut interest rates again next week, a negative for the euro because it makes higher-yielding currencies more attractive.
People have been playing up the fact that the euro zone is running out of time because their steps have been incremental and not big enough to calm fears, said Mark McCormick, currency strategist at Brown Brothers Harriman in New York.
They are making progress, but everyone is looking for a game-changer.
The dollar rose 0.4 percent against a currency basket <.DXY>, to 78.646
U.S. Treasury prices rose. Benchmark 10-year Treasury notes traded 12/32 higher in price to yield 2.04 percent, down from 2.10 percent late Thursday.
Three-month dollar Libor gained after falling on Thursday for the first time since July.
OIL, GOLD ADVANCE
Brent crude oil futures closed higher as the unemployment rate bode well for oil demand, and as geopolitical tensions over Iran's nuclear program raised fears of supply disruptions.
In London, ICE January Brent crude settled at $109.94 a barrel, up 95 cents, or 0.87 percent.
Gold also rose. It posted its largest weekly gain in over a month. A strengthening Labour market supported worries over inflation.
Spot gold was up 0.2 percent at $1,746.59 an ounce.
(Reporting by Caroline Valetkevitch in New York, with additional reporting by Julie Haviv, Gene Ramos and Frank Tang in New York; Editing by Dan Grebler)