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By Sinéad Carew and Amanda Cooper
NEW YORK/LONDON (Reuters) -MSCI's global equities index rose on Friday while the dollar climbed to its highest level since mid-August as investors heaved a sigh of relief after a surprisingly strong U.S. labor market report.
Oil prices rose and settled with their biggest weekly gains in over a year on the mounting threat of a region-wide war in the Middle East, but gains were limited as U.S. President Joe Biden discouraged Israel from targeting Iranian oil facilities.
Earlier on Friday, the U.S. Bureau of Labor Statistics said 254,000 workers were added to nonfarm payrolls last month, above the 140,000 economists had estimated. The 4.1% unemployment rate was below estimates while August job growth was revised higher.
U.S. Treasury yields rose to their highest level since early August as traders ditched bets that the Federal Reserve will cut rates by half a percentage point next month after the stronger-than-expected jobs report.
Traders now see a roughly 97% probability the Fed will cut rates by only a quarter percentage point in November, up from roughly 68% on Thursday, CME Group's FedWatch tool showed.
"U.S. equities reaction to this very strong jobs growth confirms that investors are most concerned about economic growth" even when it comes with a "hawkish disruption," said Julia Hermann, global market strategist, New York Life Investments.
"The fact the market has been able to digest this hawkish shift points to a constructive view about the economic outlook," Hermann added, pointing to moves in U.S. Treasuries as well as stocks.
Likely bringing further relief for U.S. economy was the reopening on Friday of U.S. East Coast and Gulf Coast ports after dockworkers and port operators reached a wage deal to settle the industry's biggest work stoppage in nearly half a century. However, clearing cargo backlog is expected to take time.
On Wall Street the Dow Jones Industrial Average rose 341.16 points, or 0.81%, to 42,352.75, registering a record closing high. The S&P 500 climbed 51.13 points, or 0.90%, to 5,751.07 and the Nasdaq Composite advanced 219.37 points, or 1.22%, to 18,137.85.
MSCI's gauge of stocks across the globe rose 4.82 points, or 0.57%, to 847.12. For the week, the index showed a roughly 0.7% decline. Earlier, Europe's STOXX 600 index rose 0.44%.
Investors remained anxious about how Israel would respond after Iran fired missiles at it on Tuesday. Supreme Leader Ayatollah Ali Khamenei said earlier that Iran and its regional allies will not back down.