GLOBAL MARKETS-Stocks, dollar rally on bumper U.S. jobs data

* U.S (Other OTC: UBGXF - news) . nonfarm payrolls jump 255,000 vs 180,000 forecast

* Data supports case for Fed rate hike this year

* Wall St hits record high on payrolls report lift

* European shares lifted by solid earnings

* Dollar rallies, drags gold lower (Updates to U.S. late-afternoon trading)

By Saqib Iqbal Ahmed

NEW YORK, Aug 5 (Reuters) - Stocks and the dollar jumped on Friday as investors cheered strong U.S. employment data which boosted expectations of an acceleration in economic growth and raised the probability of a Federal Reserve interest rate hike this year.

Forecast-beating U.S. nonfarm payrolls numbers, coming a day after the launch of a Bank of England monetary easing package, sent U.S. Treasury yields higher.

MSCI (Frankfurt: 3HM.F - news) 's world stocks index, which tracks shares in 45 countries, was up 0.59 percent, advancing for a second straight day. The index added to gains as the U.S. benchmark S&P 500 stock index rose to a record intraday high.

U.S. nonfarm payrolls rose by 255,000 in July as hiring increased broadly after an upwardly revised 292,000 surge in June, the U.S. Labor Department said. Economists had expected a rise of 180,000.

"This is definitely a very solid report, and I think Fed policymakers have to be very pleased with this," said Kathy Jones, fixed income strategist at Charles Schwab in New York.

Fed fund futures showed traders see close to even odds of a rate hike by early 2017, a change from before the jobs report when they saw little chance of a hike until well into next year.

Futures priced in an 18 percent chance the Fed will raise rates at its policy meeting next month, up from 9 percent late on Thursday.

The S&P 500 touched 2,182.33, its ninth record intraday high since July. Financials, which benefit from rising interest rates, led gains.

"We are going to need tech leadership and financial support in order to stay higher," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

The Dow Jones industrial average rose 163.2 points, or 0.89 percent, to 18,515.25, the S&P 500 gained 16.06 points, or 0.74 percent, to 2,180.31 and the Nasdaq Composite added 53.93 points, or 1.04 percent, to 5,220.18.

The S&P financial sector was up 1.8 percent.

Europe's broad FTSEurofirst 300 index closed up 1 percent at 1,344.81. Solid earnings from companies including cement maker LafargeHolcim (LSE: 0QKY.L - news) helped.

The dollar rallied to hit one-week peaks against the euro and the Swiss franc and turned positive versus the yen after the jobs data.

The dollar index, which tracks the greenback against six major currencies, was up 0.48 percent to 96.215.

The rallying dollar dragged commodities, including gold and oil, lower.

Gold (Other OTC: GDCWF - news) is sensitive to rising U.S. interest rates, which lift the opportunity cost of holding the non-yielding asset while boosting the dollar, in which it is priced.

Spot gold prices were down 1.63 percent to $1,338.58 an ounce, on pace for the worst drop in more than three weeks.

Oil prices, which fell 1 percent earlier in the session, steadied in late trading, as short-covering returned to support the market.

Brent crude settled down 2 cents at $44.27 a barrel, while U.S. crude settled down 13 cents at $41.80.

U.S. Treasury prices, which move inversely to yields, fell across the board.

"The selloff in shorter-maturity bonds says the bond market today thinks the Fed is likely to tighten sometime in the immediate months ahead," said Jonathan Lewis, chief investment officer at Fiera Capital Inc in New York.

Benchmark 10-year U.S. Treasury yields hit a more than one-week high of 1.587 percent, while two- and three-year yields hit one-week highs of 0.726 percent and 0.847 percent, respectively. (Reporting by Saqib Iqbal Ahmed; Additional reporting by Sam Forgione and Chuck Mikolajczak in New York and Lucia Mutikani in Washington; Editing by Meredith Mazzilli and James Dalgleish)