* Investors shrug off disappointing jobs report, citing weather impact
* Unemployment rate falls to five-year low of 6.6 percent
* Bond prices rise on the jobs report, economic softness feared
By Herbert Lash
NEW YORK (Reuters) - Global equity markets surged on Friday as investors set aside any fear of economic softness in a weak U.S. jobs report, but bond yields and the dollar fell as the data showed employers hired far fewer workers than expected in January.
Non-farm payrolls rose by 113,000, well below the consensus of 185,000, although the unemployment rate hit a five-year low of 6.6 percent, the U.S. Labor Department said.
The dollar fell broadly as safe-haven gold and U.S. government debt prices rose on the lackluster report. But stocks rallied, with investors writing off the weakest two months of U.S. job growth in three years on inclement weather.
For the week, the S&P 500 easily recouped losses from earlier in the week that had pushed the U.S. benchmark down to lows last seen in October. The 2.6 percent surge over Thursday and Friday was the biggest two-day gain in four months.
The household survey from which the jobless rate is derived showed strong gains in employment and an increase in the number of people in the labor force, a reprieve from concerns about a potential soft patch in the economy.
The proportion of working-age Americans with a job rose to 58.8 percent, the highest since October 2012.
"Markets are increasingly behaving as though the recent series of soft economic data is truly attributable to bad weather, and not some broader downturn in demand," said David Joy, chief market strategist at Ameriprise Financial in Boston.
"It's unlikely that the economic momentum from late last year simply stalled in December and January," Joy said.
U.S. gross domestic product grew by the most in a decade in the last half of 2013, the Commerce Department said last week.
MSCI's all-country stock index rose 1.2 percent, and its gauge of emerging markets rose 0.89 percent.
The pan-European FTSEurofirst 300 index of leading shares closed up 0.75 percent at 1,300.11, helped by steelmaker Arcelor
Arcelor rose 0.81 percent to 12.495.
On Wall Street, the Dow Jones industrial average rose 165.55 points, or 1.06 percent, to close at 15,794.08. The S&P 500 gained 23.59 points, or 1.33 percent, to 1,797.02 and the Nasdaq Composite added 68.739 points, or 1.69 percent, to 4,125.861.
For the week, the Dow rose 0.6 percent, the S&P 0.8 percent and the Nasdaq 0.5 percent.
"Expectations for the (unemployment) report were too high, and investors are giving the report the benefit of the doubt because of the weather," said Donald Selkin, chief market strategist at National Securities in New York.
After the sell-off earlier in the week, the fact that equities rose after Thursday's gains indicated there is still momentum to the bull market, Selkin said.
"Stocks initially got killed after the report came out, but now we're pretty sharply higher. That's a strong sign that we've bottomed out," he said.
Though the labor market report called into question the strength of the economy, the preponderance of most economic data still shows some pretty good growth, said Anthony Valeri, investment strategist at LPL Financial in San Diego.
"We're seeing earnings on track to grow about 9 percent year-over-year, and as long as that's the case, the pullback in stocks is likely to be limited," Valeri said.
"The data hasn't been weak enough to suggest that the current earnings trajectory will deviate," he said.
Earnings have been holding up.
Of the 343 companies in the S&P 500 that have reported earnings to date for last year's fourth quarter, 67.9 percent beat analyst expectations, Thomson Reuters data show. In a typical quarter since 1994, 63 percent beat estimates.
The dollar index fell 0.29 percent to 80.675, as the euro gained 0.34 percent to 1.3634 against the greenback. The dollar rose 0.2 percent to 102.28 against the yen.
U.S. government debt rose, but gains were trimmed as the session progressed to the close.
The benchmark 10-year U.S. Treasury note rose 5/32 in price, pushing its yield down to 2.6820 percent.
German Bund futures settled up 50 ticks at 143.83, retreating from earlier highs of 144.02, while cash 10-year yields on government debt fell to 1.66 percent.
U.S. COMEX gold futures for April delivery settled up $5.70 at $1,262.90 an ounce.
Oil rose more than $1 to one-month highs, fueled by a sharp rally in gasoline and heating oil as supplies tightened and refiners started to shut down plants for maintenance.
Brent crude oil futures rose $2.20 to $109.39 a barrel. U.S. crude settled up $2.04 to $99.88 a barrel.
GRAPHIC:
U.S. unemployment: http://link.reuters.com/wam54t
Nonfarm payrolls: http://link.reuters.com/byw66v
U.S. payrolls gap: http://link.reuters.com/kem54t
(Additional reporting by Blaise Robinson in Paris, Reporting by Herbert Lash; Editing by Chris Reese, Andrew Hay, Nick Zieminski and Dan Grebler)
