GLOBAL MARKETS-Dollar, stocks slide on renewed Middle East tensions

(Adds close of U.S. markets)
* MSCI all-world, U.S. stock indexes hit record highs
* Stocks, dollar pare gains on renewed signs of Iran tension
* U.S. payrolls weaker than expected in December
* Dow industrials index surpasses 29,000 mark

By Herbert Lash
NEW YORK, Jan 10 (Reuters) - The dollar fell and global
equity markets retreated from fresh highs on Friday, as signs of
renewed U.S.-Iranian tensions scuttled a rally triggered by a
U.S. labor report showing a strong economy despite slowing job
growth in December.
The United States said it was imposing additional sanctions
on Iran as a result of its missile attack on U.S. troops in Iraq
this week, and Washington rebuffed an Iraqi request to pull out
its troops. Iraq appears set to bear the brunt of any further violence
between neighboring Iran and the United States, sparked by the
U.S. killing of Qassem Soleimani, Iran's top general, in a drone
strike on Jan. 3. Iran's firing of missiles at U.S. forces in
Iraq on Wednesday was in response to the general's killing.
A gauge of equity performance in 49 countries and the major
Wall Street indexes hit records in early trade after the Labor
Department's jobs report showed the pace of hiring last month
was sufficient to keep the U.S. economic expansion on track.
But stock markets later slid as investors eyed the
longer-term risks of Middle East conflict. The dollar fell from
four-week highs against the safe-haven yen and slid versus the
Swiss franc, another safe haven.
"The fact that the U.S. is still sort of acting aggressively
toward Iran and still taking a hard line helped create demand
for safe havens," said Karl Schamotta, chief market strategist
at Cambridge Global Payments in Toronto.
MSCI's all-country world index .MIWD00000PUS shed 0.03%,
paring an early advance that lifted it to an all-time high.
Stocks on Wall Street retreated after the Dow Industrials
earlier crossed the 29,000 mark for the first time, helped by
gains in technology and healthcare stocks.
The Dow Jones Industrial Average .DJI fell 133.13 points,
or 0.46%, to 28,823.77, the S&P 500 .SPX lost 9.35 points, or
0.29%, to 3,265.35 and the Nasdaq Composite .IXIC dropped
24.57 points, or 0.27%, to 9,178.86.
European shares also retreated. The pan-European STOXX 600
index .STOXX lost 0.12% and Germany's DAX .GDAXI fell 0.09%,
while Britain's FTSE 100 .FTSE closed down 0.14%.
The Labor Department said the U.S. jobless rate held steady
at near a 50-year low of 3.5% last month and nonfarm payrolls
increased by 145,000 jobs, above the 100,000 mark needed to keep
up with population growth but below expectations. A Reuters poll showed the market expected job growth of
164,000.
"When you strip away some of the 'headline stuff,' the guts
of the report were really quite constructive if you were
building the case for a consumer that's going to continue to
chug along," said Tom Porcelli, chief U.S. economist at RBC
Capital Markets in New York.
The soft U.S. payrolls number, following a batch of strong
economic figures, was unlikely to sway the Federal Reserve from
its current neutral stance on rates, analysts said.
"The economy continues to grow and there's an absence of
inflation pressure, and that's positive for stocks and bonds,"
said Joseph LaVorgna, chief economist for the Americas at French
bank Natixis in New York.
The dollar index .DXY fell 0.09%, with the euro EUR= up
0.13% to $1.1119. The Japanese yen JPY= strengthened 0.03%
versus the greenback at 109.49 per dollar.
MSCI's emerging market currency index .MIEM00000CUS , was
little changed on Friday after hitting a 1-1/2-year high on
Thursday, but was still likely to post its sixth straight week
of gains.
Oil fell below $65 a barrel in its first weekly loss since
late November, erasing the week's risk premium sparked by
Soleimani's killing as investors focused on rising U.S.
inventories and other signs of ample supply.
Worries over the longer-term risks of conflict could
potentially push prices higher, however.
Brent crude LCOc1 , the global benchmark, slid 39 cents to
settle at $64.98 a barrel, its first weekly decline in six
weeks. West Texas Intermediate crude CLc1 settled down 52
cents to $59.04.
U.S. gold futures GCv1 settled up 0.4% at $1,560.1 an
ounce.

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