Stocks and the dollar jumped on Friday on strong US employment data that boosted expectations of an acceleration in economic growth and raised the probability of a Federal Reserve interest rate hike this year.

Forecast-beating US nonfarm payrolls numbers, released a day after the launch of a Bank of England monetary easing package, sent US Treasury yields higher.

MSCI's world stocks index .MIWD00000PUS, which tracks shares in 45 countries, was up 0.59 percent, advancing for a second straight day. The index added to early gains as the US benchmark S&P 500 stock index rallied to close at a record high.

US nonfarm payrolls rose by 255,000 in July as hiring increased broadly after an upwardly revised 292,000 surge in June, the US Labor Department said. Economists had expected a rise of 180,000.

"This is definitely a very solid report, and I think Fed policymakers have to be very pleased with this," said Kathy Jones, fixed income strategist at Charles Schwab in New York.

Fed fund futures priced in an 18 percent chance the Fed will raise rates at its policy meeting next month, up from 9 percent late on Thursday.

US stocks notched their best day in a month. Gains were led by a 1.9 percent jump in financials .SPSY, which would be primed for profit boosts should the Fed hike rates.

"We are going to need tech leadership and financial support in order to stay higher," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

The Dow Jones industrial average .DJI rose 191.48 points, or 1.04 percent, to close at 18,543.53, the S&P 500 .SPX gained 18.62 points, or 0.86 percent, to finish at 2,182.87 and the Nasdaq Composite .IXIC added 54.87 points, or 1.06 percent, to end at 5,221.12.

Europe's broad FTSEurofirst 300 index .FTEU3 closed up 1 percent at 1,344.81. Solid earnings from companies including cement maker LafargeHolcim (LHN.S) helped.

The dollar rallied to hit one-week peaks against the euro EUR= and the Swiss franc CHF= and turned positive versus the yen JPY= after the jobs data.

The dollar index .DXY, which tracks the greenback against six major currencies, was up 0.49 percent to 96.226.

The rallying dollar dragged commodities, including gold and oil, lower.

Gold is sensitive to rising US interest rates, which lift the opportunity cost of holding the non-yielding asset while boosting the dollar, in which it is priced.

Spot gold prices XAU= were down 1.8 percent to $1,336.25 an ounce, its worst drop in nearly three months.

Oil prices, which fell 1 percent earlier in the session, steadied to finish little changed, as short-covering returned to support the market.

Brent crude LCOc1 settled down 2 cents at $44.27 a barrel, while US crude CLc1 settled down 13 cents at $41.80.

US Treasury prices, which move inversely to yields, fell across the board.

"The selloff in shorter-maturity bonds says the bond market today thinks the Fed is likely to tighten sometime in the immediate months ahead," said Jonathan Lewis, chief investment officer at Fiera Capital Inc in New York.

Benchmark 10-year US Treasury yields US10YT=RR hit a more than one-week high of 1.587 percent, while two- US2YT=RR and three-year yields US3YT=RR hit one-week highs of 0.726 percent and 0.847 percent, respectively. – Reuters