A strong U.S. jobs report failed to boost world markets for long on Friday as nagging worries about Europe's debt crisis dragged stocks back down and sent the euro currency to a new 16-month low.
The U.S. Labor Department said employers added 200,000 jobs in December, pushing the unemployment rate down to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months. The job gains cap a six-month stretch in which the U.S. economy generated 100,000 jobs or more in each month _ something that hasn't happened since April 2006.
An improvement in the U.S. labor market is crucial for global markets because American consumer spending accounts for a fifth of the world's economic activity. A recovery in the U.S. would also mitigate the impact of the sharp slowdown in Europe.
But longer-term concerns about the euro and the region's financial system pulled stock markets back down shortly after the Wall Street open. They also pushed the euro currency to a 16-month low of $1.2681, the weakest since early September 2010.
European market indexes, which had risen on the U.S. data, closed mostly lower. Germany's DAX fell 0.6 percent to 6,057.92 while France's CAC-40 shed 0.2 percent to 3,137.36. Britain's FTSE 100 managed to rise, by 0.5 percent to 5,649.68.
Wall Street turned lower after the open, with the Dow losing 0.2 percent to 12,393.45, while the S&P 500 dropped almost 0.1 percent to 1,280.96. Asian market indexes had earlier closed lower.
A stream of poor European data continued Friday, with a drop in retail sales and economic sentiment among consumers and businesses during the key spending month of December. Unemployment in the 17-nation eurozone also remained at a worrying 10.3 percent and could worsen as the region slides back toward recession.
Even strong economies like Germany were being affected by the gloom generated by the debt crisis. Industrial orders in Germany dropped sharply in November as demand from abroad dropped, nearly erasing a strong gain from the previous month. Orders were down 4.8 percent compared to the previous month, the Economy Ministry reported Friday. In October, orders rose 5 percent.
Italy's benchmark 10-year bond yield edged further above 7 percent, a borrowing rate that is considered unsustainable over the longer term.
Italy, along with many other European governments, has to roll over huge amounts of debt in coming months. It is trying to restore investor confidence in its public finances to get those bond yields down and pay lower rates when it raises cash from capital markets.
Traders were also watching for comments from Italian Premier Mario Monti, who was holding talks Friday in Paris with French President Nicolas Sarkozy.
European banks, meanwhile, are hurting due to fears that they will take big losses on their holdings of government debt and will struggle to raise new cash to plug those holes.
Trading in UniCredit, Italy's largest bank, was halted for the second straight day Thursday after the stock lost a quarter of its value in two days. The bank says it would need to offer huge discounts to investors to raise money in a new share sale. The stock was down another 11 percent Friday in volatile trading.
Outside the eurozone, Hungary slid deeper into its own financial crisis. The Fitch Ratings agency downgraded Hungary's credit grade by a notch to BB+ _ junk status _ citing the country's disagreements with the EU and IMF over conditions linked to rescue loans.
Hungary had to pay a staggeringly high interest rate of 10 percent on its 12-month debt in an auction Thursday, an indication it is losing investors' trust.
In Asia, stocks ended mostly lower as they reacted to the previous day's European market jitters. Japan's Nikkei 225 Index closed 1.2 percent lower at 8,390.35. Hong Kong's Hang Seng index fell 1.2 percent at 18,593.06 and South Korea's Kospi fell 1.1 percent to 1,843.14. Benchmarks in Taiwan and Indonesia also fell. India and Singapore rose.
In mainland China, the benchmark Shanghai Composite Index gained 0.7 percent to 2,163.39, while the smaller Shenzhen Composite Index gained 0.5 percent to 817.78.
Japanese stocks are hurt by the yen's rise against the dollar, which makes exports less competitive internationally. On Friday, the dollar was steady around 77.10 yen.
Benchmark oil for February delivery fell 40 cents to $101.41 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell by $1.41 to end Thursday at $101.81 in New York.
Pamela Sampson in Bangkok contributed to this report.