By Caroline Valetkevitch
NEW YORK (Reuters) - Major world stock indexes jumped and U.S. Treasury yields tumbled on Friday after a slowdown in job growth fuelled hopes of a U.S. interest rate cut, while hints of progress in Washington's trade fights added to equity market optimism.
The U.S. dollar index dropped and gold prices rallied to their highest levels since April 2018 after the U.S. Labour Department's monthly report, which also showed wages rose less than expected in May. Yields on 10-year Treasury notes hit their lowest since September 2017.
The jobs data suggested the loss of momentum in economic activity was spreading to the labour market, which could put pressure on the Federal Reserve to cut rates this year.
On Wall Street, the benchmark S&P 500 index and Dow Jones industrial average registered their biggest weekly percentage gains since November.
"Right now the market is willing to accept disappointing growth in exchange for the prospect of lower rates," said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.
Hopes that the Fed would turn more accommodative to blunt the impact of escalating trade tensions have helped support stocks in recent days.
Friday's trade-related news gave investors reason to cheer, though. The U.S. government said it was granting Chinese exporters two more weeks to get their products into the United States before increasing tariffs on those items. Also, President Donald Trump said there was a "good chance" the United States would make a trade deal with Mexico.
The Dow Jones Industrial Average rose 263.28 points, or 1.02%, to 25,983.94, the S&P 500 gained 29.85 points, or 1.05%, to 2,873.34 and the Nasdaq Composite added 126.55 points, or 1.66%, to 7,742.10.
The pan-European STOXX 600 index rose 0.93% and MSCI's gauge of stocks across the globe gained 1.01%.
In late U.S. Treasuries trading, yields on U.S. 10-year Treasury notes were 3.70 basis points lower at 2.086%. They touched 2.053% after the payrolls report, their lowest since September 2017.
With tensions between the United States and its trading partners still brewing, investors have been assessing how global central banks will respond to signs of a downturn.
Traders now are betting on multiple rate cuts by the Fed over the next 12 months.
But a cut is not guaranteed. And the potential for central banks to disappoint markets was highlighted on Thursday, when the European Central Bank declined to hint it would cut rates soon.
The U.S. dollar index fell to its lowest since March 26 and was last down 0.5%. The euro was up 0.54% to $1.1335.
In the energy market, crude prices gained sharply after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June.
Brent crude futures gained $1.62, or 2.6%, to settle at $63.29 a barrel. U.S. crude ended at $53.99 a barrel, up $1.40, or 2.7%.
Gold prices jumped to their highest levels since April 2018 as the jobs report sent the dollar lower. Spot gold was 0.4% higher at $1,339.97 per ounce, having earlier hit its intra-day high of $1,348.08.
(Graphic: World FX rates in 2019 link: http://tmsnrt.rs/2egbfVh)
(Graphic: MSCI All Country Wolrd Index Market Cap link: http://tmsnrt.rs/2EmTD6j)
(Graphic: Emerging markets in 2019 link: http://tmsnrt.rs/2ihRugV)
(Additional reporting by Sruthi Shankar in Bengaluru, Sinead Carew, Stephanie Kelly and Richard Leong in New York; and Arijit Bose; editing by Diane Craft and Tom Brown)