* Nonfarm payrolls increased by 57,000 jobs last month

* Economists polled by Reuters had forecast 110,000

* Oil hits fresh four-month lows, easing inflation worries

* Dollar/yen down 1% to 161 per dollar, euro/dollar up 0.7%

* Chipmakers in Korea struggle after U.S. peers slide

overnight

(Updates after U.S. payrolls)

By Alun John and Stella Qiu

LONDON/SYDNEY, July 2 (Reuters) - Stocks and government bond

prices rose on Thursday and the dollar dropped after data showed

U.S. job growth slowed more than expected in June and numbers

for the prior month were revised lower.

Nonfarm payrolls increased by 57,000 jobs last month, after

a downwardly revised 129,000 rise in May, the Labor Department's

Bureau of Labor Statistics said in its closely watched

employment report.

Economists polled by Reuters had forecast payrolls advancing

110,000 after a previously reported 172,000 increase in May.

The data caused traders to slightly trim their bets on

Federal Reserve rate hikes. They are now not fully pricing a

25-basis-point rate hike until December's meeting, and see a

hike by September's meeting as finely balanced.

That shift sent the rate-sensitive U.S. 2-year yield down 5

basis points to 4.11%. Benchmark 10-year yields

dropped 1 bp to 4.46%.

Bond yields move inversely to prices.

"With the Federal Reserve considering rate hikes, this is

not necessarily a bad report for the stock market. Lower bond

yields would likely be welcomed by technology investors, who

have become increasingly concerned about the rising cost of the

AI buildout," said Shawn Snyder, economic strategist at Potomac

Fund Management.

"This report alone is not enough to take a rate hike off the

table, but it may be enough to push the timing out."

S&P 500 futures were last 0.4% higher, having been

up around 0.1% before the data, and Europe's STOXX 600 benchmark

index traded up 1%.

With short-dated bond yields and rate expectations broadly

steady, the fall in U.S. yields weighed on the dollar,

particularly against the Japanese yen.

The euro and pound each rose 0.8%, to $1.1471

and $1.3378 respectively, their highest in about two weeks,

while the dollar slid 1.1% on the yen to 160.78.

The dollar was already trading lower on the yen, with the

Japanese currency having strengthened sharply and suddenly early

in European trading.

The yen has been teetering around a 40-year low against the

U.S. currency, causing traders to brace for the possibility

Japanese authorities would step in to support their currency.

It was not immediately clear what had driven the earlier

move, but analysts said it was more muted than after previous

interventions.

CHIPMAKERS SLIDE

Away from the data, chipmaker stocks were in particular

focus on Thursday, with Asian names tumbling a day after the

Philadelphia SE Semiconductor index eased 6.3%, albeit

after posting dramatic second-quarter gains.

South Korea's KOSPI sank 7.8%, extending Wednesday's

slide of 2%, after an eye-watering second-quarter surge of 68%

on soaring AI-related demand for memory chips. SK Hynix

plunged 14%, and Samsung tumbled 9%.

"The plunge in Asia semis today is more about a hangover

from Wall Street," said Fabien Yip, a market analyst at IG,

adding that profit-taking appeared to be the key driver.

"Layered on top is Apple's reported outreach to restricted

Chinese memory makers for China-market devices, which introduces

pricing threat to the Korean and Japanese incumbents."

There is also potentially some rebalancing going on, as

investors use the new quarter to rejig positioning.

Also in the mix was a further decline in oil.

Brent crude hit new four-month lows, down 1.4% at

$70.4 a barrel, as U.S. President Donald Trump said talks with

Iran had gone well in Qatar and more oil tankers transited

through the Strait of Hormuz.

Gold was helped by lower yields, bouncing 2.2% to $4,124 an

ounce after a drop of 14% in the second quarter.