* U.S. stocks edge higher amid growing hopes of recovery
* U.S. dollar rises as jobs data dulls market optimism
* Bonds slip as U.S. jobs losses were fewer than feared
* Oil prices slip as jobs report points to less demand (Recasts with U.S. markets, changes dateline, previous LONDON)
By Herbert Lash
NEW YORK, April 3 (Reuters) - U.S. stocks edged higher and the dollar rose on Friday as gloomy data on the U.S. labor market failed to eclipse growing sentiment among investors that the worst of a deep financial crisis may be over.
Crude prices slipped after surging nearly 9 percent the day before as the shedding of 663,000 American jobs in March weighed on oil futures even amid rising optimism that Group of 20 actions taken on Thursday will help spur recovery.
U.S. Treasury and short-dated euro zone government bond prices fell on the perception of improving economic conditions, which undercut the safe-haven bid for bonds.
Investors continued to sell government bonds, notably shorter-dated euro zone paper, even as stocks in early trade gave back some gains, a day after the European Central Bank disappointed analysts by cutting interest rates by less than expected.
"Investors are more confident than they were that we could be at the bottom of the downturn globally," said Nick Stamenkovic, bond strategist at RIA Capital Markets in Edinburgh. "That's taken the shine off bonds, supporting the risk assets, particularly equities," he said.
The S&P 500 and Nasdaq rose while the Dow briefly turned positive as technology stocks extended gains and the financial sector reversed an earlier drop.
Technology shares rose after results from BlackBerry maker
Research In Motion
After 1 p.m., the Dow Jones industrial average <.DJI> was down 21.74 points, or 0.27 percent, at 7,956.34. The Standard & Poor's 500 Index <.SPX> was up 0.20 points, or 0.02 percent, at 834.58. The Nasdaq Composite Index <.IXIC> was up 6.44 points, or 0.40 percent, at 1,609.07.
European shares closed lower, with drugmakers and oil companies falling, as contractions in the British and euro zone services sectors provided further evidence of recession on top of the U.S. jobless report.
The British and euro zone's service sectors contracted again in March, but not as rapidly as prior months, offering some hope that the worst of the downturn may have passed. [ID:nL3670963]
"After the euphoria of the G20, some economic reality has kicked in," said Philip Lawlor, chief portfolio strategist at Nomura in London. "We had a good run and some people have decided to lock profits in."
The pan-European FTSEurofirst 300 index of top shares fell 1.3 percent to 771.60 points. The index rose 7.1 percent over the week and is up more than 19 percent from a lifetime low on March 9.
Drugmakers were among the biggest losers. Novo Nordisk slumped 13.7 percent after a U.S. advisory panel failed to back its experimental diabetes drug Victoza, or liraglutide.
The bleak U.S. jobs report kept a lid on gains in the dollar, only slightly dimming the optimism that swelled after world leaders at the G20 summit in London agreed to pump $1.1 trillion into the world economy to fight the crisis.
Gains were limited as the dollar tends to rise in response to bad news because investors see it as the safest store of value at a time when economies across the globe are shrinking.
"There had been a degree of enthusiasm that perhaps the world economy has seen the worst, and the jobs data tempered that enthusiasm a bit," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
The dollar rose against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.03 percent at 84.349. Against the yen, the dollar
The euro
Bond prices fell. The benchmark 10-year U.S. Treasury note
U.S. light sweet crude oil
"The jobs report was apparently priced in and was pretty much in line with expectations," said Mike Fitzpatrick, vice president at MF Global in New York.
Asian stocks rose for a fourth day on a risk-taking rally spurred by the G20 summit. The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> edged up 0.7 percent, and is now more than 20 percent higher since late February.
Japan's Nikkei share average <.N225> closed up 0.3 percent, after being higher for most of the session. (Reporting by Steven C. Johnson, Richard Leong in New York and Jamie McGeever, Brian Gorman, Chris Baldwin in London; writing by Herbert Lash, Editing by Chizu Nomiyama)