(Updates after jobs data)

By Kristina Cooke

NEW YORK, May 4 (Reuters) - U.S. stock futures pointed to a higher open on Friday on takeover news, including reports that Microsoft (MSFT.O: Quote, Profile , Research) is stepping up its interest in buying Yahoo Inc. (YHOO.O: Quote, Profile , Research), and as April jobs data quelled inflation fears.

Yahoo's shares rose 16.7 percent to $32.88 in electronic trading after the Wall Street Journal and the New York Post reported that Microsoft, the world's biggest software company, has asked the Web media company to return to formal talks. For details see [ID:nN04222536]. Microsoft shares fell 0.9 percent to $30.68.

The U.S. economy added a weaker-than-expected 88,000 jobs in April, the slimmest gain in more than two years, as employment fell in retail and manufacturing and unemployment edged up, a Labor Department report showed. [ID:nN04311851].

"This confirms the economy is slowing a little bit. Most importantly, average hourly earnings were up only 0.2 percent, so the fact that's easing is encouraging on the inflation front," said Jeff Kleintop, chief market strategist at LPL Financial Services in Boston.

"In the stock market it's going to be more a rally on earnings and the takeover bids than on the jobs report."

S&P 500 futures <SPc1> were up 4.20 points, above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures <DJc1> were up 31 points and Nasdaq 100 <NDc1> futures were up 8.75 points.

In other deal news, Clear Channel Communications Inc. (CCU.N: Quote, Profile , Research), the largest U.S. radio station operator, said late on Thursday it had rejected a revised $19.6 billion bid from a private equity group, days before a crucial vote on the deal.

Media shares in Europe were already on fire after news and financial information and news provider Reuters Group Plc (RTR.L: Quote, Profile , Research) (RTRSY.O: Quote, Profile , Research) said it had been approached by an unnamed third party about a possible takeover. Reuters shares were up 26.2 percent in London. [ID:nL04409595] and [ID:nL04405067]. Reuters ADRs gained 26 percent to $74.28.

Canadian publisher Thomson Corp (TOC.N: Quote, Profile , Research) (TOC.TO: Quote, Profile , Research) is in talks to buy Reuters, Canada's Globe and Mail newspaper said on Friday, citing unidentified sources close to both companies.

Earnings due on Friday included photography company Eastman Kodak (EK.N: Quote, Profile , Research), the Washington Post (WPO.N: Quote, Profile , Research) and U.S. forest products company Weyerhaeuser Co. (WY.N: Quote, Profile , Research).

The Standard & Poor's 500 index topped 1,500 for the first time since September 2000 on Thursday after a series of indicators showed signs of strength in the U.S. economy and a moderate rise in wage inflation.

The Dow industrials closed at a record for the third straight day, led by a 3.7 percent gain in Verizon Communications Inc. (VZ.N: Quote, Profile , Research) on news that it is taking video and Internet customers from rival Cablevision Systems (CVC.N: Quote, Profile , Research).

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