GLOBAL MARKETS-Stocks rise on U.S. jobs data; dollar lower

* U.S. nonfarm payrolls up 157,000 in January

* U.S. and European stocks get a lift, MSCI world index higher

* U.S. dollar dips against euro to $1.3658

NEW YORK, Feb 1 (Reuters) - U.S. and European stock indexes rallied while the U.S. dollar extended its decline against the euro on Friday after data showed U.S. payrolls grew in January alongside revisions to the upside in the previous two months. The euro's rise to a fresh 14-month high against the dollar came on rising risk tolerance after the jobs data. But the dollar was already under pressure after the U.S. central bank earlier this week said it will maintain its bond-buying and loose monetary policies. The MSCI world equity index was up 0.4 percent, having strengthened earlier on factory activity surveys for January in China and in the euro zone, which increased optimism over the global growth outlook. "The combination of stronger-than-expected job growth, combined with an unemployment rate that suggests the Fed will remain in stimulus mode, should be received well by the equity market," said Todd Salamone, director of research at Schaeffer's Investment Research in Cincinnati, Ohio. The Dow Jones industrial average was up 132.09 points, or 0.95 percent, at 13,992.67. The Standard & Poor's 500 Index was up 11.83 points, or 0.79 percent, at 1,509.94. The Nasdaq Composite Index was up 23.25 points, or 0.74 percent, at 3,165.38. The FTSEurofirst 300 was up 0.5 percent at 1,170.64. American employers added 157,000 new jobs to their payrolls in January, slightly less than expected, but there were 127,000 more jobs created in November and December than previously reported. The jobs growth figures soothed some of the concerns about the outlook for the U.S. economy after disappointing fourth quarter GDP figures.

Earlier, shares moved higher across Europe when euro zone factories recorded their best month in nearly a year during January although remaining mired in recession, according to the Markit Purchasing Managers' Index (PMI). "Providing there are no further setbacks to the region's debt crisis, these data add to the expectation that the euro zone is on course to return to growth by mid-2013," said Chris Williamson, chief economist at data compiler Markit. Chinese factories only managed a slight rebound as the new year began, suggesting that world economic growth remains sluggish.

EURO RALLY The euro was last up 0.5 percent at $1.3643 with the session peak at $1.3674. The common currency also hit a 33-month high against the yen. A separate report showed U.S. consumer sentiment unexpectedly improved in January as Americans felt Washington's deal to avert the "fiscal cliff" at the beginning of the year boded well for the economy. In other data, the pace of growth in the U.S. manufacturing sector picked up in January to its highest level in nine months as new orders and employment improved, according to an industry report released on Friday. The Institute for Supply Management (ISM) said its index of national factory activity rose to 53.1 from 50.2 in December, beating economists' expectations of 50.6. It was the highest level since April 2012. A source of strength for the economy in the early years of the recovery, the manufacturing sector lost some steam in the second half of last year and contracted in November in the wake of Superstorm Sandy. German Bund futures edged higher to last trade 21 ticks up on the day at 142.11. The benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 1.9619 percent.

GOLD GAINS Gold was up 0.3 percent at $1,668.36 an ounce, silver was up 1.1 percent at $31.75 an ounce and three month copper on the London Metal Exchange rose to $8,272 a tonne. In the oil market the rising economic optimism coupled with tension across the Middle East, the world's biggest oil producing region, has put Brent crude on track to its biggest weekly gain in two months, while U.S. crude is set to rise for an eighth straight week. Brent oil was up 0.8 percent to $116.49, although U.S. crude futures slipped 19 cents to $97.30 a barrel.