GLOBAL MARKETS-Stocks choppy after U.S. jobs report sell-off

·3 min read

(Updates to early afternoon U.S. trading)

* U.S. stocks mixed following Friday sell-off

* Treasury yields decline

* Oil rises 1%, off multi-month lows

By Lawrence Delevingne

Aug 8 (Reuters) - World stock markets were mostly flat on Monday, unable to recover much from a sell-off last week triggered by a strong U.S. jobs report that bolstered the case for sharp interest rate increases. The dollar weakened and government bond yields fell.

On Wall Street, the Dow Jones Industrial Average rose 0.08%, to 32,831.23; the S&P 500 lost 0.05%, to 4,143.27; and the Nasdaq Composite added just 0.04%, to 12,662.28.

The broad Euro STOXX 600 was up about 0.75% on Monday, led by cyclical and growth stocks, helping it recover losses from Friday. The MSCI world equity index, which tracks shares in 47 countries, added just 0.22%.

Higher rates remained squarely in focus for investors.

"The rise in inflation and the Fed's reaction to it has been a real headwind for valuations this year," Morgan Stanley strategists wrote in a note on Monday. "However, it's also been a tailwind for earnings. Now, we are on the other side of that mountain, and operating leverage is rolling over likely more than the consensus expects."

Indeed, business investment appears to be an early victim of red-hot U.S. inflation and rising interest rates, according to new U.S. government data.

The strong U.S. jobs data raised the stakes for the July U.S. consumer prices report due on Wednesday, which could see a further acceleration in inflation.

"We see inflation staying above the Fed’s 2% target through next year," BlackRock Investment Institute strategists wrote in a note on Monday. "We think the Fed will keep responding to calls to tame inflation until it acknowledges how that would stall growth."

U.S. Treasury yields dipped as investors continued to digest the jobs report and how the Fed will react. Fed funds futures traders are now pricing for a 67.5% chance of another 75-basis-point rate increase in September, and for the Fed funds rate to rise to 3.65% by March, from 2.33% now.

Benchmark 10-year note yields fell to 2.764% on Monday, after getting as high as 2.869% on Friday, the highest since July 22. Two-year yields were last at 3.217%, after reaching 3.331% on Friday, the highest since June 16.

DOLLAR EXCEPTIONALISM?

The U.S. dollar fell nearly 0.5% versus a basket of six major currencies to 106.19, giving up some gains after strengthening on the jobs boom and the jump in yields.

Foreign exchange analysts were bullish on the U.S. currency's prospects.

"Data like this will further any thoughts about 'U.S. exceptionalism' and is very positive for the USD against all currencies," said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to the U.S. jobs statistics.

The euro squeezed out slim gains to reach $1.02.

Bitcoin and other cryptocurrencies, which tend to act as a barometer for risk appetite, gained. Bitcoin was last up 3.3% at $23,952.

Gold broke higher on Monday as the dollar and Treasury yields retreated. Spot gold rose 0.8% to $1,787 per ounce, after dropping 1% in the previous session. U.S. gold futures added 0.66% higher to $1,784.

Oil prices edged up on Monday, hovering near their lowest levels in months in volatile trading as positive economic data from China and the United States spurred hopes for demand growth despite recession fears.

U.S. crude rose 1% to $89.91 per barrel and Brent also added about 1%, to $95.91 per barrel. (Reporting by Lawrence Delevingne in Boston, Tom Wilson in London and Wayne Cole in Sydney; Editing by Andrew Heavens, Bernadette Baum and Jane Merriman)