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US labor market stronger than expected

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China says door is open for trade talks

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Japan eyes US Treasury holdings as negotiation tool

(Updates to morning trade)

By Stephen Culp

NEW YORK, May 2 (Reuters) - Wall Street and European

stocks surged and the dollar lost ground on Friday as investor

appetite for risk was revived by a strong U.S. employment report

and signs China is open to tariff negotiations.

All three major U.S. stock indexes were sharply higher, with

economically sensitive financials, transports and

microchips outperforming the broader market.

The S&P 500 and the Nasdaq are on track to be essentially

unchanged on the week, while the blue-chip Dow has set course

for a modest weekly gain.

The U.S. economy added more jobs than expected last month

and wage inflation came in below consensus, according to the

Labor Department, prompting a jump in benchmark U.S. Treasury

yields.

Beijing is "evaluating" Washington's offer to hold talks

over U.S. President Donald Trump's crushing tariffs, China's

Commerce Ministry said, signaling a potential de-escalation of

the market-rattling trade war.

"There was really not anything not to like about the jobs

data; it indicates that the economy is doing just fine," said

Paul Nolte, senior wealth advisor & market strategist at Murphy

& Sylvest in Elmhurst, Illinois. "There are still discussions

about the impacts of tariffs, but so far at least, that data has

not shown up in a lot of the numbers."

"The fact that China is willing to come to the table is

encouraging," Nolte added. "But right now, it's talk. Let's see

what happens next."

Lack of clarity regarding U.S.-China trade duties has

contributed to a marked deterioration in U.S. businesses'

long-term outlooks, the latest round of quarterly earnings

results has shown.

Apple ( AAPL ) and Amazon.com ( AMZN ) reported quarterly

earnings late Thursday with disappointing forecasts, including

Apple's ( AAPL ) estimated $900 million in tariff costs. The reports took

some wind from the sails of the "magnificent seven" group of

artificial intelligence-related megacap stocks, which had

enjoyed a rebound this week.

General Motors ( GM ) warned of a $4-$5 billion hit to

earnings and American Airlines ( AAL ) withdrew profit

forecasts.

The Dow Jones Industrial Average rose 422.95 points,

or 1.04%, to 41,175.91, the S&P 500 rose 65.11 points, or

1.16%, to 5,669.25 and the Nasdaq Composite rose 220.24

points, or 1.24%, to 17,930.98.

European shares surged as revived hopes of Sino-U.S. trade

negotiations fed investor risk appetite.

MSCI's gauge of stocks across the globe

rose 12.43 points, or 1.49%, to 847.58.

The pan-European STOXX 600 index rose 1.68%, while

Europe's broad FTSEurofirst 300 index rose 36.24

points, or 1.73%.

Emerging market stocks rose 24.83 points, or

2.23%, to 1,136.80. MSCI's broadest index of Asia-Pacific shares

outside Japan closed higher by 2.54%, to

595.66, while Japan's Nikkei rose 378.39 points, or

1.04%, to 36,830.69.

Treasury yields rose as the strong employment data led

investors to pare bets on a Federal Reserve rate cut in June.

Treasuries also came under pressure from fears of Japan

leveraging its massive U.S. debt holdings as a negotiating tool

in trade talks.

The yield on benchmark U.S. 10-year notes rose

6.6 basis points to 4.297%, from 4.231% late on Thursday.

The 30-year bond yield rose 4.4 basis points to

4.7809% from 4.737% late on Thursday.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Fed, rose 8.8 basis

points to 3.789%, from 3.701% late on Thursday.

The dollar extended its losses in the wake of the upbeat

U.S. jobs report.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

fell 0.59% to 99.55, with the euro up 0.61% at $1.136.

Against the Japanese yen, the dollar weakened 0.89%

to 144.13.

Crude extended its slide as investors positioned themselves

ahead of an expected decision by OPEC+ to boost output.

U.S. crude fell 1.55% to $58.32 a barrel and Brent

fell to $61.26 per barrel, down 1.4% on the day.

Gold prices firmed but were headed for a weekly loss amid

easing trade tensions.

Spot gold rose 0.34% to $3,251.24 an ounce. U.S. gold

futures rose 1.33% to $3,252.60 an ounce.