GLOBAL MARKETS-Stocks rally as US jobs data surpasses expectations

* Stocks rise on outsized U.S (Other OTC: UBGXF - news) . jobs gains

* U.S. added 287,000 jobs in June

* Jobs report seen as unlikely to boost chances of Fed rate hike (Updates to U.S. market open, adds quotes, changes dateline, previous LONDON)

By Dion Rabouin

NEW YORK, July 8 (Reuters) - Stocks jumped on Friday and U.S. Treasury yields edged up from this week's record lows after data showed that U.S. job growth accelerated rapidly in June, surpassing even the most optimistic of forecasts.

The U.S. economy added 287,000 jobs last month, according to the Labor Department, smashing the consensus forecast of 175,000, and wiping off the table any lingering expectations that the Federal Reserve might cut interest rates in the coming months.

U.S. equity markets advanced on the news, led higher by the financial sector.

The Dow Jones industrial average rose 173.99 points, or 0.97 percent, to 18,069.87, the S&P 500 gained 21.88 points, or 1.04 percent, to 2,119.78 and the Nasdaq Composite added 52.08 points, or 1.07 percent, to 4,928.89.

"What this report does is it assuages fears about the economy losing momentum. That's been weighing on the minds of investors," said Quincy Krosby, market strategist at Prudential (Amsterdam: PD8.AS - news) Financial in Newark, New Jersey.

"In order for the market to keep going higher, there needs to be assurance that the economy is on solid footing and that the most important component of the economy, which is the U.S. consumer, is still gaining."

European stocks extended gains, with Germany's DAX stock index rising more than 2 percent to lead the region's bourses. Europe's FTSEuroFirst 300 index of top shares was up 1.15 percent.

Still, the upbeat U.S. jobs report failed to significantly alter the longer term outlook for U.S. interest rates, which are expected to be kept on hold for at least a year, according to Fed funds futures prices.

Investors see a zero percent chance the Federal Reserve will raise U.S. interest rates at this month's policy meeting on July 27 and see less than a 25 percent chance of a rate hike before year-end, according to CME Group (Kuala Lumpur: 7018.KL - news) 's FedWatch tool.

The 10-year U.S. Treasury yield rose 5 basis points to a session high of 1.42 percent after the release of the report, moving further away from Tuesday's record low 1.321 percent.

However, worries over the world economy following Britain's vote to leave the European Union and a deepening crisis in Italian banks continue to cloud investor sentiment globally.

"Even (Taiwan OTC: 6436.TWO - news) though the Fed's dual mandate involves full employment and price stability, they're looking far beyond these two parameters to figure out what they're going to be doing," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale (Swiss: 519928.SW - news) in New York.

"They're much more in risk management mode, much more concerned about developments overseas and it's not clear how global factors will affect the U.S. economy."

Low expectations for a Fed rate hike also pushed the U.S. dollar down against the yen. While the dollar rose immediately after the jobs report, climbing to a two-week high, those gains evaporated and the dollar traded mostly flat on the day at 100.80 yen.

The dollar was little changed from its late Thursday levels against a basket of major currencies, at 96.383.

The first measure of UK consumer confidence since the Brexit referendum two weeks ago showed the joint-steepest decline in morale since 1994, according to research company GfK (Swiss: GFK.SW - news) on Friday. (Reporting by Dion Rabouin; Additional reporting by Jamie McGeever in London; Editing by Bernadette Baum)