GLOBAL MARKETS-Stocks jump, gold off highs on U.S. jobs data

The number of U.S. workers filing new claims for jobless benefits fell more than expected last week to a 10-month low, while worker productivity surged at a 9.5 percent annual rate, improving the outlook for both the economy and inflation.

The more stable dollar put a damper on commodity prices in general. U.S. crude oil prices dropped as much as $1 per barrel, snapping a three-day rally, as investors adopted a cautious tone before Friday's key U.S. employment report.

Short-dated U.S. Treasury prices rose on the benign inflation outlook, which resonated with the U.S. Federal Reserve's pledge a day earlier to keep interest rates low for "an extended period."

Long-dated Treasury prices fell, however, on concerns about upcoming supply of bonds and as the positive news on the economy curbed the safe-haven bid for government debt.

Wall Street stock indexes closed about 2 percent higher, with the Dow closing about 10,000 for the the first time in two weeks.

The surprising drop in new claims for U.S. jobless benefits helped, and created "some anticipation that maybe tomorrow's employment report may be better than expected," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto warned that Friday's key monthly U.S. employment report will be the real test for markets.

"Unemployment is already close to 10 percent, but if it comes out at 10 or above, then there will be worries that the consumers are not there for spending, and that will hurt the market," he said.

Wall Street was also supported by a rally in technology shares after Cisco Systems the network equipment maker, posted a stronger-than-expected quarterly profit. [ID:nN04515993]

The Dow Jones industrial average . ended up 203.82 points, or 2.08 percent, at 10,005.96, while the Standard & Poor's 500 Index .SPX climbed 20.13 points, or 1.92 percent, to 1,066.63. The Nasdaq Composite Index. rose 49.80 points, or 2.42 percent, to 2,105.32.

MSCI's all-country world stock index .MIWD00000PUS rose 0.8 percent while the pan-European FTSEurofirst .FTEU3 ended up 0.6 percent at 990.53 points