US shares advance on heating job market

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US stocks and the greenback advanced as significantly better-than-expected jobs data confirmed expectations that the economic recovery was starting to accelerate.

The Dow Jones industrial average rose 0.38 per cent, the S&P 500 index gained 0.46 per cent and the Nasdaq Composite Index climbed 0.61 per cent in early afternoon trading.

US private employers added 297,000 jobs in December, a report by the ADP payrolls processor showed, about three times more than what economists forecast.

The jump in private payrolls comes two days ahead of the government's more comprehensive labour report.

"We've been building toward a big number ... That's pointing to a big payroll number ahead, and I think we'll get a big healthy report on Friday," Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut, told Reuters.

A separate report showed that US service industries grew in December at the fastest pace since May 2006.

The Institute for Supply Management's non-factory index, which covers about 90 per cent of the world's largest economy, rose to 57.1, exceeding the median forecast of economists surveyed by Bloomberg News, from 55 in November.

The optimism also bolstered the currency. The Dollar Index, which measures the greenback's value against six other major currencies, strengthened 0.81 per cent in early afternoon trading in New York.

The greenback climbed 1.5 per cent against the yen to 83.23 yen. The euro fell 1.1 per cent to US$1.3157.

"If, in fact, employment is kicking in, then that would set the tone for self-sustained growth, underpin interest rates, and very much underpin the dollar," Bob Sinche, global head of FX strategy at RBS Global Banking and Markets in Stamford, Connecticut, told Reuters.

It was bad news for fixed-income securities as economic strength, with the potential for inflation, erode their value.

US Treasuries fell, pushing yields higher. Ten-year yields rose 12 basis points to 3.45 per cent at midday in New York, according to BGCantor Market Data. Thirty-year bond yields climbed 10 basis points to 4.52 per cent.

It was a similar story for gold. Spot gold fell 0.3 per cent to US$1,376.20 an ounce at 12.27pm EST. Earlier, it fell more than 1 per cent, a day posting its biggest one-day loss since early November.

"A lot of gold's weakness has to do with the fact that investors believe economic performance is going to pick-up as we start 2011," James Dailey, portfolio manager of the Team Asset Strategy Fund, told Reuters.