New York, Reuters - US Treasury bond prices rose but stocks were little changed on Friday after the biggest monthly decline in US payrolls in five years fed expectations the Federal Reserve will cut interest rates further to bolster the sluggish US economy.

Trading in the energy, currency and equity markets around the globe was choppy as investors assessed the outlook for the U.S. economy and how much more damage a global credit crunch can inflict.

A drop in March U.S. payrolls, as well as revisions that showed bigger declines in January and February, led many investors to believe the Fed would continue to cut rates aggressively.

The dollar slipped against the euro after the employment data, but oil prices rose more than 2 percent as the dollar's weakness following the jobs data outweighed fears of a demand slowdown in the world's biggest energy consumer.

Gold gained as the oil rally and weaker-than-expected U.S. jobs data pushed the dollar down and boosted its appeal as an alternative investment. A weaker dollar makes gold cheaper for holders of other currencies and often spurs demand.

The U.S. unemployment rate jumped to 5.1 percent last month from 4.8 percent in February, stirring speculation of more aggressive rate cuts. Investors already know that in the short term, economic data is going to be bad, but many look for a rebound in this year's second half, said Henk Potts, a strategist at Barclays Wealth.

"The big question for investors is, 'Have the aggressive interest rate cuts from the Fed and the stimulus packages coming through ... been enough to generate a bounce-back in the broader economy in the second half?'" said Potts.

U.S. equity markets see-sawed through much the day, with the Nasdaq rising as much as 1 percent and the Dow and the S&P 500 Index, a broader gauge of market sentiment, staying above water for much of the session. The Dow Jones industrial average <.DJI> closed down 16.61 points, or 0.13 percent, to 12,609.42.

The Standard & Poor's 500 Index <.SPX> rose 1.09 points, or 0.08 percent, to 1,370.40. The Nasdaq Composite Index <.IXIC> rose 7.68 points, or 0.32 percent, to 2,370.98. While the jobs data was disappointing, a surge in economically sensitive stocks in recent weeks suggests investors believe the worst may be nearly over, said Al Goldman, chief market strategist at Wachovia Securities in St. Louis.

"I think the market is in a bottoming process, that we've seen the lows, that bottoms take a while. I think momentum is up and early weakness would be a buying opportunity," he said. It was the first time the U.S. economy shed jobs for three straight months since a five-month decline in 2003, when the economy was mired in a jobless recovery from the 2001 recession. In U.S.

Treasury debt trading, the benchmark 10-year U.S. Treasury note rose 28/32 to yield 3.4845 percent while the 2-year Treasury note gained 5/32, to yield 1.8306 percent. "The downbeat labor report confirms why consumer confidence sank so deep this quarter and why the Fed will have to keep lowering interest rates at their future meetings," said Brian Fabbri, managing director of economic research at BNP Paribas in New York. European shares closed higher in a volatile session, led by mining shares and UBS, which is under pressure to break up. But the surprisingly large fall in U.S. jobs data tempered gains.

The FTSEurofirst 300 index <.FTEU3> of top European shares rose 0.48 percent to 1,318.43 points, pushing gains for the week to 4.1 percent, the strongest weekly performance in over a year. UBS was among the top gainers, rising 3.3 percent, after former Chief Executive Luqman Arnold pushed to have the Swiss bank broken up. Euro zone government bond prices rose, pushing most yields lower, after the U.S. jobs data helped to raise prospects of another interest rate cut.

Earlier, Japan's Nikkei stock average <.N225> slid 0.7 percent, although it ended the week up 3.7 percent, its third successive week of positive finishes. In currency trading, the dollar fell against a basket of major trading-partner currencies, with the U.S. Dollar Index <.DXY> down 0.25 percent at 71.973. The euro rose 0.31 percent to $1.5727, and against the Japanese yen the dollar fell 0.73 percent to 101.53.

Oil rose after the U.S. unemployment numbers triggered falls in the dollar, whose weakness has boosted oil and other dollar-denominated commodities as investors pour money into those assets to hedge against inflation. U.S. crude settled up $2.40 to $106.23 a barrel while London Brent crude gained $2.38 to $104.90. Spot gold prices in New York rose $10.70, or 1.19 percent, to $913.60.

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