Updates to afternoon trading

By Stephen Culp

NEW YORK, May 2 (Reuters) - Wall Street and European stocks surged and the dollar lost ground on Friday as investor risk appetite was strengthened by a strong U.S. employment report and signs China is open to tariff negotiations.

All three major U.S. stock indexes were sharply higher, with economically sensitive financials .SPSY, transports .DJT and microchips .SOX outperforming the broader market.

All three indexes were headed for weekly gains.

The U.S. economy added more jobs than expected last month and wage inflation came in below consensus, according to the Labor Department, prompting a jump in benchmark U.S. Treasury yields.

"There was really not anything not to like about the jobs data; it indicates that the economy is doing just fine," said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest in Elmhurst, Illinois. "There are still discussions about the impacts of tariffs, but so far at least, that data has not shown up in a lot of the numbers."

Beijing is evaluating Washington's offer to hold talks over U.S. President Donald Trump's crushing tariffs, China's Commerce Ministry said, signaling a potential de-escalation of the market-rattling trade war.

"China and the U.S. are both taking slow but repeated steps toward negotiation and reconciliation," Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis. "It seems the spiraling-out-of-control phase ended."

"The market does not believe that the current tariff rates are going to persist for very long," Ellerbroek added.

Lack of clarity regarding U.S.-China trade duties has contributed to a marked deterioration in U.S. businesses' long-term outlooks, the latest round of quarterly earnings results has shown.

Apple AAPL.O and Amazon.com AMZN.O reported quarterly earnings late on Thursday with disappointing forecasts, including Apple's estimated $900 million in tariff costs. The reports took some wind from the sails of the so-called Magnificent Seven group of artificial intelligence-related megacap stocks, which had enjoyed a rebound this week.

General Motors GM.N warned of a $4 billion-$5 billion hit to earnings and American Airlines AAL.O withdrew profit forecasts.

The Dow Jones Industrial Average .DJI rose 586.76 points, or 1.44%, to 41,339.67, the S&P 500 .SPX rose 93.31 points, or 1.67%, to 5,697.77 and the Nasdaq Composite .IXIC rose 322.93 points, or 1.83%, to 18,035.16.

European shares surged, closing the book on a busy earnings week as revived hopes of Sino-U.S. trade negotiations and solid employment data stoked investor optimism.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 14.11 points, or 1.69%, to 849.31.

The pan-European STOXX 600 .STOXX index rose 1.67%, while Europe's broad FTSEurofirst 300 index .FTEU3 rose 36.55 points, or 1.75%.

Emerging market stocks .MSCIEF rose 23.31 points, or 2.10%, to 1,135.28. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed higher by 2.4%, to 594.90, while Japan's Nikkei .N225 rose 378.39 points, or 1.04%, to 36,830.69.

Treasury yields rose as the strong employment data led investors to pare bets on a Federal Reserve rate cut in June.

Treasuries also came under pressure from fears of Japan leveraging its massive U.S. debt holdings as a negotiating tool in trade talks.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 9.7 basis points to 4.328%, from 4.231% late on Thursday.

The 30-year bond US30YT=RR yield rose 6.5 basis points to 4.8021% from 4.737% late on Thursday.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 14.1 basis points to 3.843%, from 3.701% late on Thursday.

The dollar dipped in the wake of the upbeat U.S. jobs report.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.08% to 100.06, with the euro EUR= up 0.04% at $1.1295.

Against the Japanese yen JPY=, the dollar weakened 0.25% to 145.06.

Crude extended its slide as investors positioned themselves ahead of an expected decision by OPEC+ to boost output.

U.S. crude CLc1 fell 1.60% to settle at $58.29 per barrel, while Brent LCOc1 settled at $61.29 per barrel, down 1.35% on the day.

Gold prices reversed earlier gains and were headed for a weekly loss amid easing trade tensions.

Spot gold XAU= fell 0.49% to $3,224.39 an ounce. U.S. gold futures GCc1 rose 0.47% to $3,225.00 an ounce.

(Reporting by Stephen Culp in New York; Additional reporting by Naomi Rovnick and Nell Mackenzie in LondonEditing by Matthew Lewis)

((stephen.culp@thomsonreuters.com; 646-223-6076;))