* Stocks ,and dollar rise, bonds fall on U.S. jobs data
* Easing Italy worries help risk markets in Europe
* Trade war fears resurface after fresh U.S. tariffs (Updates to U.S. market open; changes dateline, previous LONDON)
By Trevor Hunnicutt
NEW YORK, June 1 (Reuters) - World stocks rose and bond prices fell on Friday as investors welcomed a stronger-than-expected U.S. jobs report and an apparent end to a political crisis in Italy, although prospects for a full-blown global trade war limited the gains.
The MSCI All-Country World index .MIWD00000PUS , which tracks shares in 47 countries, gained 0.74 percent. Still, it was set for a third week of losses, brought on by earlier risks of a snap election in Italy.
The robust U.S. jobs report locked in expectations of an interest rate hike by the Federal Reserve this month and sent U.S. stocks higher. payrolls increased by 223,000 jobs in May, while the average hourly earnings rose 0.3 percent after edging up 0.1 percent in April. The unemployment rate dropped to an 18-year low of 3.8 percent. job numbers are very strong, widespread, or broad based, that was an indication of strength from the report," said Michael Arone, chief investment strategist at State Street Global Advisors.
"The really good news for markets is the average hourly earnings continues to be very steady and does not signal a buildup in inflationary pressures, so overall a very solid report."
The Dow Jones Industrial Average .DJI rose 203.69 points, or 0.83 percent, to 24,619.53, the S&P 500 .SPX gained 25.8 points, or 0.95 percent, to 2,731.07 and the Nasdaq Composite .IXIC added 92.60 points, or 1.24 percent, to 7,534.72.
Benchmark 10-year Treasury notes US10YT=RR fell 19/32 in price to yield 2.8894 percent, from 2.822 percent late Thursday.
ITALY
Leaders of Italy's anti-establishment parties revived coalition plans late on Thursday, apparently ending three months of political turmoil. The new government was being installed on Friday. stocks .FTMIB rallied 1.63 percent, the standout performers in Europe. The political crisis knocked more than 9 percent off the Italian benchmark in May, its worst month since June 2016. The pan-European FTSEurofirst 300 index .FTEU3 rose 1.18 percent. .EU
Italian two-year yields, which soared to five-year highs above 2.7 percent on Tuesday, rose in price on Friday to yield 1.038 percent IT2YT=RR .
TRADE TENSIONS
Of potentially greater concern to investors was the renewed prospect of a global trade war after the United States imposed steel and aluminum tariffs on Canada, Mexico and the European Union.
Canada and Mexico retaliated with levies on billions of dollars of U.S. goods from orange juice to pork. The European Union was set to tax bourbon whiskey and Harley Davidson motorcycles. U.S. dollar climbed against the yen JPY= . The Canadian dollar rose 0.04 percent and the Mexican peso gained 0.26 percent versus the U.S. dollar. Both currencies fell on Thursday after the U.S. decision to impose tariffs. FRX/
U.S. crude CLcv1 fell 0.81 percent to $66.50 per barrel and Brent LCOcv1 was last at $76.80, down 0.98 percent. The spread between Brent crude oil futures contracts and U.S. WTI stood at its widest for three years. O/R
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