GLOBAL MARKETS-Red hot U.S. payrolls pull rug under June Fed rate cut bet

(Updates at 1300 GMT) By Huw Jones LONDON, April 5 (Reuters) - The dollar and bond yields rose on Friday after much stronger than expected growth in March U.S. payrolls sent investors scurrying to review their bets on when the Federal Reserve will cut interest rates. The U.S. Labor Department reported that nonfarm payrolls increased by 303,000 in March, far ahead of a forecast rise of 200,000 from economists polled by Reuters, potentially delaying rate cuts. U.S. Treasury yields rose on the prospect that the Fed would be in no rush to cut rates, while U.S. interest rate futures pared back the odds of cut in June to 54.4%. Hopes of the Fed beginning a cycle of rate cuts in June have helped to propel shares to record highs. "It definitely pushes out rate cut expectations. You can see the market is already pricing after September now," said Brad Bechtel, global head of FX at Jefferies in New York, adding it would continue to support the dollar. The jobs data initially knocked U.S. stock index futures EScv1 , NQcv1 , 1YMcv1 but they quickly found their feet to trade firmer, recovering some ground after the three key U.S. indexes fell more than 1% each on Thursday on hawkish Fed comments and Middle East tension. With payrolls out of the way, investors will look to next week's U.S. CPI inflation data for March to feed their Fed bets. The dollar =USD firmed against peer currencies after rebounding from a two-week low. Gold XAU= eased after the data, but was still headed for its third straight week of gains, underpinned by safe haven flows. The MSCI All Country stock index .MIWD00000PUS was down 0.4% at 770.2 points as it continued to ease in the first week of the quarter after hitting a lifetime high at 785.62 points on March 21. In Europe, the STOXX .STOXX index of 600 companies dropped to more than a two-week low, with the benchmark on track for its worst day since mid-October. It was down 1% at 505.45 points after Tuesday's lifetime high of 515.77 points. A cooling U.S. services sector and comments this week from Fed Chair Jerome Powell reinforced the view that rate cuts were likely to commence at some point this year. However, some other Fed officials have taken a more conservative view, with Minneapolis Fed President Neel Kashkari, in particular, striking a more hawkish stance overnight, saying rate cuts might not be required this year if inflation continues to stall. Mark Ellis, CEO of Nutshell Asset Management, said that so far, there appears to be a healthy pullback in markets after grinding higher in a very tight trendline to leave it looking a bit stretched. He pointed to a jump in the VIX .VIX , Wall Street's "fear gauge", which posted its highest close on Thursday since Nov. 1. "It suggests we are at a bit of a turning point now, whether this is a natural pullback in a bull market, or whether it's going to turn into something a little bit more," Ellis said. ASIA EASES MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.45%, tracking Thursday's late tumble on Wall Street as risk aversion dominated the market mood. The index was set to end the week little changed. A holiday in China also made for thinner trade. Tokyo's Nikkei .N225 fell 2%, pressured in part by a stronger yen, thanks to the prospect of further rate hikes there and more jawboning from Japanese officials. .T Hong Kong's Hang Seng Index .HSI was little changed. The dollar was up 0.336% against a basket of currencies =USD , helping to send the euro EUR=EBS down 0.26%. The yen JPY=EBS edged up 0.2%. The 10-year yield US10YT=RR on U.S. Treasuries was firmer at 4.3855%. US/ The two-year yield US2YT=RR firmed at 4.7106%. Bond yields move inversely to prices. In commodities, Brent crude LCOc1 edged up 0.25% to $90.88 a barrel, after striking a more than five-month high on Thursday. U.S. crude CLc1 was slightly firmer at $86.64 per barrel. Gold gained was flat at $2,290 an ounce XAU= , nearing its record high on Thursday. GOL/ <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates YTD http://tmsnrt.rs/2egbfVh Global asset performance http://tmsnrt.rs/2yaDPgn Asian stock markets https://tmsnrt.rs/2zpUAr4 FED AND YIELDS https://tmsnrt.rs/3PPRCCV Nine of the 11 major S&P 500 sectors eye weekly losses https://tmsnrt.rs/3vCooAL ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Rae Wee and Huw Jones; Editing by Tom Hogue, Clarence Fernandez, Nick Macfie and Toby Chopra) (([email protected];)) ((To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA ))