GLOBAL MARKETS - Stocks Rally, Bonds Steady as Data Affirms Rate Cut Outlook

GLOBAL MARKET - NEW YORK/LONDON. Global shares rallied and bond yields were steady on Thursday after an increase in new claims for U.S. unemployment benefits kept the outlook for the Federal Reserve to cut interest rates intact as the market awaits a key jobs report at week's end.

The number of Americans filing new claims for unemployment benefits rose to a two-month high last week as labor market conditions gradually ease and help soften inflation pressures.

Though layoffs increased to a 14-month high in March, job cuts were little changed compared to the same period last year, pointing to a still strong labor market.

"We're seeing that people are getting jobs and even though you may have had a bit more people who got laid off, we got a lot more of them getting jobs," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities in New York.

"This number is showing you the tenor of the labor market remains very firm. More importantly, continuing claims is well below the two million level" considered normal, he said.

Equity markets jumped and gold prices rallied to an all-time high, with spot gold hitting $2,304.09 an ounce. MSCI's gauge of global equity performance gained 0.69%, close to its all-time high.

On Wall Street, the Dow Jones Industrial Average rose 0.42%, the S&P 500 gained 0.66% and the Nasdaq Composite added 0.86%.

Recent economic data has boosted the prospect of monetary policy easing later this year, though the timing and how much the U.S. central bank might cut remain unclear. High mortgage rates and tightness in bank funding also are key concerns.

"When you think about the Fed's overall mandate and creating an overall healthy economy, they're also thinking about the banking sector and the housing market," said Tony Roth, chief investment officer at Wilmington Trust in Philadelphia.

"Those areas would be much more normalized if they could move to a lower rate environment," he said.

Treasury yields slid after hitting multi-month highs on Wednesday as jobless claims suggested some weakness and bond investors balanced their positions before Friday's jobs report for March.

Nonfarm payrolls likely increased by 200,000 jobs, down from a 275,000 rise in February, a Reuters survey shows.

The two-year Treasury yield, which reflects interest rate expectations, rose 1 basis points to 4.689%, while the yield on the benchmark 10-year note was down 0.8 basis points at 4.347%.

Sentiment was aided on Wednesday by after Fed Chair Jerome Powell reaffirmed that U.S. rates were still on course to be cut this year, though the timing was data dependent.

The dollar hit a two-week low on expectations for the Fed to cut rates by July, if not June, while the battered yen held steady under the key 152 level.

The dollar index, a measure of the U.S. currency versus six peers, fell 0.19%, while the risk of Japanese intervention kept the dollar little changed at 151.70 yen .

Oil prices were steady on Thursday, shored up by concerns about lower supply as major producers keep output cuts in place and geopolitical tensions add further risk.

U.S. crude recently fell 0.28% to $85.19 per barrel and Brent was at $89.23, down 0.13% on the day.