GLOBAL MARKETS-Shares gain after surprise drop in U.S. unemployment

* U.S. unemployment rate falls to nearly a four-year low

* European shares extend gains, Wall Street set to open higher

* Dollar jumps against yen, little changed on euro

LONDON, Oct 5 (Reuters) - European shares extended their gains and the dollar rose against the yen on Friday after a key jobs report from the United States showed its unemployment rate had dropped to 7.8 percent in September, its lowest point in nearly four years.

Employers said the U.S. economy added 114,000 jobs last month in the nonfarm sector, a touch above forecasts for 113,000 jobs while jobs growth in August was revised sharply higher.

U.S. stocks were also set to rise when Wall Street opens after on the data with the S&P 500 futures contract up 5.9 points, the Dow Jones industrial average futures adding 50 points and Nasdaq 100 futures up 13 points.

"It's a surprise. That said, the jobless rate coming down to 7.8 percent has a lot to do with labour force participation. But overall, it's being taken as a strong number," said Lane Newman, director of foreign exchange trading at ING Capital.

The data encouraged investors to sell U.S. government bonds extending losses in the benchmark 10-year Treasury note

to 14/32, and pushing its yield up to 1.72 percent.

The dollar rose to session highs against the yen to 78.78

and was last at 78.72 yen, up 0.3 percent. The euro

was slightly lower at $1.3010.

European markets earlier had already been in a positive mood following reassurance from the European Central Bank on Thursday that it stood ready to buy Spain's bonds if it requested aid, and that Europe now had a "fully effective backstop mechanism in place" to protect the euro.

The European Central Bank envisions buying large volumes of sovereign debt for periods of 1-2 months once its bond buying programme is triggered, senior central bank sources have told Reuters.

The pan-European FTSEurorfirst 300 equity index extended its gains after the U.S. jobs report to be at a day's high of 1,111.95, points, up 1.1 percent.

(Reporting by Richard Hubbard. Editing by Peter Graff)

(( +44 207 5423215))