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Initial claims for state jobless aid climbed 6,000 to a seasonally adjusted 401,000, the Labor Department said, from 395,000 the prior week.

That left claims holding steady around the 400,000 mark, which is usually regarded as consistent with some improvement in the jobs market, for a second week. Economists, who had expected claims to rise to 410,000, saw this as yet another sign the ailing economy was not falling back into recession.

"Claims suggest that layoffs remain contained despite high uncertainty in the economy. We continue to expect moderate growth rather than a recession," said Guy Berger, an economist at RBS in Stamford, Connecticut.

The data falls outside the survey period for the government's closely watched employment report for September, which will be released on Friday.

Nonfarm payrolls likely increased 60,000 last month, according to a Reuters survey, after being flat in August.

The gain in nonfarm employment will mostly reflect the return of 45,000 striking Verizon Communications workers to payrolls. The jobless rate is seen steady at 9.1 percent.

U.S. stocks rose for a third day, while prices for government debt fell. The dollar was marginally weaker against a basket of currencies.

THREAT FROM EUROPE

The lofty level of unemployment has put downward pressure on incomes, weighing on consumer spending.

However, reports by U.S. retailers on Thursday suggested back-to-school sales were brisk last month, and 23 retailers posted an average sales gain of 5.1 percent at stores open at least a year, according to Thomson Reuters. Analysts were anticipating a 4.6 percent rise.

Data ranging from manufacturing to motor vehicle sales have also suggested that the economy, which expanded at a 1.3 percent annual rate in the second quarter, could avoid an outright contraction in output.

While the weak labor market remains the Achilles heel of the recovery, an even bigger threat is looming from Europe's debt crisis. Economists warn troubles in the euro zone could push the U.S. economy into a new recession.

Treasury Secretary Timothy Geithner said on Thursday Europe's debt crisis could significantly damage the U.S. economy, although major U.S. banks and money market funds have little direct exposure.

"Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand," he said according to testimony obtained by Reuters.

The European Central Bank on Thursday took steps to pump more cash into the banking system in a bid to contain the debt problem.

Slow domestic growth prompted the Federal Reserve last month to announce a new measure designed to push long-term borrowing costs lower by shifting assets on its balance sheet.

Interest rates have dropped in response, with the 30-year fixed mortgage rate falling to a record low 3.94 percent this week, according to Freddie Mac.

Although the labor market stalled in August, it appears to have regained some footing in late September. The four-week moving average of initial claims -- considered a better measure of labor market trends -- fell for a second week.

"If initial jobless claims continue to trend lower that would be an encouraging sign that labor market conditions may be improving," said John Ryding, chief economist at RDQ Economics in New York.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped to its lowest level since July in the week ended September 24.

A total of 6.86 million Americans were claiming unemployment benefits during the week ended September 17 under all programs, down 123,009 from the prior week.

(Editing by James Dalgleish)

* At 0851 GMT, futures for the S&P 500, Dow Jones and Nasdaq 100 were up between 0.7 and 0.9 percent.

* The FTSEurofirst 300 index of leading European shares was up 1.8 percent at 932.99 points, ahead of interest rate and policy decisions from the European Central Bank and Bank of England.

* The STOXX Europe 600 Banking Index rose 3.6 percent, extending gains after the European Union's executive proposed member states carry out a co-ordinated recapitalization of banks.

* Shares in Apple fell in early trade on the Frankfurt stock exchange, down more than 3 percent, after co-founder and former CEO Steve Jobs died following a long battle with cancer and other health issues.

* Initial jobless claims are expected to rise to 410,000 for the week ended October 1, up from 391,000. Continuing claims are seen rising slightly to 3.72 million from 3.71 million. The data comes ahead of Friday's all-important non-farm payrolls.

* Constellation Brands, the world's largest branded wine maker, will shed light on the state of consumer spending when it reports fiscal second-quarter earnings. Analysts expect a profit of 66 cents per share, up from 52 cents a year ago.

* On Wednesday, U.S. shares rose a second day, continuing a recovery from a slump that had seen the S&P 500 enter bear-market territory.

* The Dow Jones industrial average rose 1.2 percent; the S&P 500 added 1.8 percent; the Nasdaq Composite rose 2.3 percent.

(Reporting by Brian Gorman; Editing by David Hulmes)

An easing of risk aversion, after an intensive sell-off earlier this week on fears that Europe's debt problems could trigger a new global financial crisis, helped boost commodities while tightening the Asian credit markets sharply.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose 1.4 percent, moving away from a two-year low hit on Tuesday.

The Nikkei stock average .N225 rose 1.4 percent on Thursday, tracking commodity- and tech-led gains in the United States. .T

MSCI's all-country world index .MIWD00000PUS rose 2 percent on Wednesday.

German Chancellor Angela Merkel said on Wednesday that Berlin was ready to recapitalize its banks if needed, adding some more reassurance following an agreement on Tuesday by European finance ministers to safeguard banks in the face of mounting concerns about a Greek default.

Further adding to positive sentiment was data showing growth in the U.S. service sector stood steady in September and private hiring picked up, suggesting the economy was not yet slipping into recession.

Asian credit markets reflected easing strains, with the iTraxx Asia ex-Japan investment grade index narrowing by 16 points on Wednesday after a sharp widening at the start of this week.

U.S. crude oil steadied above $79 a barrel on Thursday as a surprise drawdown in U.S. crude inventories helped offset pressure from the euro debt crisis. On Wednesday, Brent crude bounced more than 2 percent to top $102 a barrel and U.S. benchmark futures jumped 5 percent.

Investors were likely to remain cautious about whether the market relief would be sustained, ahead of key events including the European Central Bank's policy meeting later this session, the last meeting held under presidency of Jean-Claude Trichet, and Friday's U.S. non-farm payrolls.

The euro was steady against the greenback in early Asian trade amid uncertainty ahead of the ECB meeting which could see rates cut or the rebirth of long-term lending to banks. The euro is well off a nine-month trough of $1.3144 struck this week.

(Editing by Alex Richardson)

The co-founder of Apple Inc, one of the world's great entrepreneurs, was surrounded by his wife and immediate family when he died in Palo Alto, California. Other details were not immediately available.

His death was announced by Apple and sparked an immediate outpouring of sadness and sympathy from world leaders, competitors and other businessmen including Microsoft co-founder Bill Gates and Facebook CEO Mark Zuckerberg.

The Silicon Valley icon who gave the world the iPod, iPhone and iPad had stepped down as chief executive of the world's largest technology company in August, handing the reins to long-time lieutenant Tim Cook.

He was deemed the heart and soul of a company that rivals Exxon Mobil as the most valuable in America.

"Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve," Apple said in a statement.

"His greatest love was for his wife, Laurene, and his family. Our hearts go out to them and to all who were touched by his extraordinary gifts."

Apple paid homage to their visionary leader by changing their website to a big black-and-white photograph of him with the caption "Steve Jobs: 1955-2011." The flags outside the company's headquarters at 1 Infinite Loop flew at half mast.

Jobs' health had been a controversial topic for years and his battle with a rare form of pancreatic cancer a deep concern to Apple fans and investors.

In past years, even board members have confided to friends their concern that Jobs, in his quest for privacy, was not being forthcoming enough with directors about the true condition of his health.

Now, despite much investor confidence in Cook, who has stood in for his boss during three leaves of absence, there remain concerns about whether Apple would stay a creative force to be reckoned with in the longer term without its visionary.

Jobs died one day after the consumer electronics powerhouse unveiled its latest iPhone, the gadget that transformed mobile communications and catapulted Apple to the highest echelons of the tech world.

His death triggered an immediate outpouring of sympathy.

"The world rarely sees someone who has had the profound impact Steve has had, the effects of which will be felt for many generations to come," Gates said. "For those of us lucky enough to get to work with him, it's been an insanely great honor. I will miss Steve immensely."

Outside an Apple store in New York, mourners laid candles, bouquets of flowers, an apple and an iPod Touch in a makeshift memorial.

"I think half the world found out about his death on an Apple device," said Robbie Sokolowsky, 32, an employee for an online marketing company, who lit a candle outside the store.

Cook said in a statement that Apple planned to hold a celebration of Jobs' life for employees "soon".

APPLE, NEXT, IPHONE

A college dropout, Buddhist and son of adoptive parents, Jobs started Apple Computer with friend Steve Wozniak in 1976. The company soon introduced the Apple 1 computer.

But it was the Apple II that became a huge success and gave Apple its position as a critical player in the then-nascent PC industry, culminating in a 1980 initial public offering that made Jobs a multimillionaire.

Despite the subsequent success of the Macintosh computer, Jobs' relationship with top management and the board soured. The company removed most of his powers and then in 1985 he was fired.

Apple's fortunes waned after that. However, its purchase of NeXT -- the computer company Jobs founded after leaving Apple -- in 1997 brought him back into the fold. Later that year, he became interim CEO and in 2000, the company dropped "interim" from his title.

Along the way Jobs also had managed to revolutionize computer animation with his other company, Pixar, but it was the iPhone in 2007 that secured his legacy in the annals of modern technology history.

Forbes estimates Jobs' net worth at $6.1 billion in 2010, placing him in 42nd place on the list of America's richest. It was not immediately known how his estate would be handled.

Six years ago, Jobs had talked about how a sense of his mortality was a major driver behind that vision.

"Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life," Jobs said during a Stanford commencement ceremony in 2005.

"Because almost everything -- all external expectations, all pride, all fear of embarrassment or failure -- these things just fall away in the face of death, leaving only what is truly important."

"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart."

(Reporting by Poornima Gupta, Edwin Chan, Andrew Longstreith, Sarah McBride; Editing by Gary Hill and Tiffany Wu)