Much weaker than expected U.S. job figures sent stocks tumbling Friday as investors worried that the American economic recovery was grinding to a halt.
The Department of Labor's statistics came in below even the most conservative estimates and lower than May's fairly dismal numbers. The U.S. economy added just 18,000 jobs in June, way below market expectations of at least 125,000. The weakness was particularly surprising after a buoyant report from the ADP private payrolls firm earlier this week.
There was even more disappointment with the news that the May increase was more than halved to 25,000 and the unemployment rate rose to 9.2 percent from 9.1 percent.
"With U.S. employers adding fewer new jobs in June than median forecasts had expected it was hardly surprising that U.S. and European stock markets would record anything other than sharp falls," said Howard Wheeldon, senior strategist at BGC Partners.
The health of the U.S. labor market is crucial for the global economy and Friday's announcement has reinforced recent fears that the recovery is running out of steam.
Those fears hit stocks and the dollar hard.
In Europe, France's CAC-40 slid 1.1 percent to 3,935, and Germany's DAX fell 0.5 percent to 7,432. The FTSE index of leading British shares lost 0.7 percent to 6,013.
Wall Street opened down sharply on the news after solid gains the previous day. The Dow Jones industrial average lost 0.9 percent to 12,612 while the broader S&P 500 index fell 1 percent to 1,340.
Following the news, the euro recouped some of its earlier losses against the dollars as investors fretted about the state of the U.S. economy and reassessed expectations of how long the U.S. Federal Reserve will keep interest rates at record low levels.
"The continuation of the economic soft-patch will cause the Federal Reserve to delay its exit strategy," said Sung Won Sohn of California State University.
The currency used by the 17-nation eurozone was down 0.3 percent to $1.4322 by early afternoon.
Earlier, Asian stocks rode expectations that the U.S. would unveil figures that would show its economy was growing. Japan's Nikkei 225 gained 0.7 percent to close at 10,138, while Hong Kong's Hang Seng index added 0.9 percent to 22,726.
Mainland Chinese shares were more cautious. The Shanghai Composite Index gained 0.1 percent to 2,797.77, while the Shenzhen Composite Index was virtually flat at 1,201.50.
Benchmark oil for August delivery erased almost all of its gains the previous day, falling $1.52 to $97.15 a barrel in electronic trading on the New York Mercantile Exchange.