European shares slump on weak EU, US data

Most European stock markets fell sharply on Friday and the euro lost ground, but French borrowing rates eased as traders braced for weekend elections in two eurozone nations.

Weak US jobs data undermined investor sentiment on both sides of the Atlantic.

London's FTSE 100 index lost 1.93 percent to close at 5,655.06 points, the Paris CAC 40 shed 1.90 percent to 3,161.97 points and in Frankfurt the DAX 30 slid 1.99 percent to 6,561.47.

But Madrid's IBEX 35 index gained 0.35 percent to 6,876 points on better Spanish employment data.

In foreign exchange deals, the euro dropped to $1.3084 from $1.3149 in New York late on Thursday, as investors also reacted to weak eurozone business data.

In New York, disappointing US job creation numbers sent Wall Street stocks falling. The data confirmed that the US economy has hit a weak patch in the past month.

The net number of jobs created in April in the US economy, the biggest in the world, at 115,000 was well below the already modest expectations of forecasters, and was underpinned by a fall in the labour market participation rate -- signalling that households are still under pressure.

The Dow Jones Industrial Average dropped 1.20 percent to 13,048 points in midday trading.

The S&P 500 fell 1.45 percent to 1,371.45, while the tech-rich Nasdaq lost 1.96 percent to 2.965.04.

"The negatives clearly outweigh the positives in today's report," said Jeffrey Greenberg, an economist with Nomura Securities, pointing to the fall in the labor market participation rate that came with the report.

Back in Europe, David Jones, chief market strategist at IG Index trading group, said: "With elections in France and Greece this weekend, there remains plenty to be worried about when we consider the eurozone."

But the rate France must pay to borrow funds for 10 years fell to the lowest level for two months on Friday as the country prepared for the final round of a presidential election on Sunday.

The rate, or yield, on existing 10-year French bonds dropped to 2.786 percent from 2.901 percent late on Thursday, a level last seen in March.

A forecast victory by Socialist candidate Francois Hollande, who has led in opinion polls for several months, did not cause the yield to rise, and the latest fall on the secondary market came after France raised more than seven billion euros ($9.2 billion) on Thursday.

Asian stock markets closed lower on Friday following nervous trading ahead of the closely watched US jobs figures, at the end of a week which has provided mixed signals on the global economy.

Investors also remained cautious before the French presidential election run-off on Sunday, with incumbent Nicolas Sarkozy trailing Hollande, who says he wants to review a recent eurozone fiscal pact.

Ahead of the vote, data released on Friday showed that eurozone private sector activity fell sharply in April, with powerhouse Germany grinding to a halt and the bloc's weaker southern members struggling badly.

The Purchasing Managers Index (PMI) compiled by the London-based research firm Markit fell to 46.7 points in April, well down from an initial 47.4 estimate.

After logging 49.1 points in March, data for April marked one of the steepest slides since the depths of the global financial crisis in 2008-09 and the sharpest decline in six months.

Investors were also looking ahead to Sunday elections in Greece that analysts warn could result in political gridlock and renewed economic turmoil in the troubled eurozone state.

Surveys suggest that voters are likely to turn away from the two main parties that have alternated in power since 1974 to fringe ones, with fears that the result would mean gridlock and more economic hardship.