(Updates after US jobs data)

By Harry Robertson and Medha Singh

Nov 1 (Reuters) - Euro zone bond yields fell on Friday

after data showed the U.S. labour market slowed sharply in

October, bolstering market expectations for Federal Reserve rate

cuts.

U.S. nonfarm payrolls grew by just 12,000 in October, in a

month when hurricanes and strikes impacted the figures. That was

down from a 223,000 rise in September and well below economists'

expectations of a 113,000 increase.

U.S. short-dated bond yields, which are sensitive to

interest rate expectations, fell sharply as investors nudged up

their bets on Fed rate cuts.

Germany's 2-year bond yield followed suit, last

down 6 basis points (bps) at 2.259%, having traded at 2.305%

before the data. Yields move inversely to prices.

The size and importance of the U.S. economy and dollar means

U.S. economic data moves markets around the world, and

expectations about Fed policy spill over to other central banks.

Germany's 10-year bond yield was last down 3 bps

at 2.359%, having stood flat at 2.389% previously. It was still

set for a weekly rise of around 7 bps.

The monthly U.S. jobs figures showed the unemployment rate

held steady at 4.1% in October, while average earnings growth

was 4% year-on-year, also unchanged from the previous month.

"While the Fed will likely attribute some of the weakness in

today's data to one-off factors, the softness...argues for the

Fed to continue its easing cycle at next week's meeting," said

Lindsay Rosner, head of multi sector fixed income investing at

Goldman Sachs Asset Management.

The U.S. 2-year Treasury yield fell 8 bps to

4.084%, after hitting its highest level since the start of

August earlier in the session.

U.S. yields have risen sharply in recent weeks, reflecting a

run of strong economic data and rising market expectations that

Republican former president Donald Trump will beat Democratic

Vice President Kamala Harris in next Tuesday's election and

implement inflationary tariff and tax policies.

European bond yields have also risen this week, driven by

the rise in U.S. yields and a jump in UK borrowing costs in the

wake of the new Labour government's budget, as well as

stronger-than-expected euro zone inflation data for October.

Italy's 10-year bond yield was 2 bps lower at

3.646%, but up around 14 bps for the week.