European FX rally versus dollar, stocks trim losses after U.S. jobs data

LONDON (Reuters) - European currencies rallied, while bond yields fell and regional equities trimmed some losses on Friday after mixed U.S. labour market showed more robust payrolls growth, but a rise in the unemployment rate, while wage inflation showed signs of cooling.

The U.S. added 311,000 payrolls in February and the unemployment rate rose to 3.6%. A survey of economists polled by Reuters expected the U.S. to have added 205,000 jobs last month and the unemployment rate to hold steady at 3.4%.

Average hourly earnings rose 0.2% last month after gaining 0.3% in January. That raised the year-on-year increase in wages to 4.6% from 4.4% in January, in part as last year's low readings dropped out of the calculation.

Germany's 2-year yield, most sensitive to changes in interest rate expectations, declined further in the aftermath of the data and was last down over 21 basis points at 3.072%, its biggest daily drop since July 22, 2022.

Germany's 10-year yield, the benchmark for the bloc, was last down 16 bps at 2.486%.

The STOXX 600 dropped briefly following the data, before reversing course to trim earlier losses and was last down 1%. An index of euro zone banks followed the same pattern and was last down 4% having taken a hit in earlier trading by the fall-out of SVB.

European currencies gained against the dollar. The euro was up 0.37% at $1.0623, having traded broadly flat before, sterling extended gains, rising 0.9% on the day to $1.20365, while the Swiss franc and Norwegian and Swedish crowns also strengthened.

(Reporting by London Markets team; writing by Samuel Indyk; editing by Amanda Cooper)