European stocks, euro extend losses on US jobs data

European stock markets slumped again and the euro hit a 23-month low versus the dollar Friday on poor US jobs data in the wake of weak economic news from China and the eurozone, traders said.

Early losses deepened after the Labor Department said the US economy only added a meager 69,000 jobs in May, pushing the unemployment rate up to 8.2 percent.

London's benchmark FTSE 100 index closed down 1.14 percent at 5,260.19 points, while in Frankfurt the DAX 30 tumbled 3.42 percent to 6,050.29 points and in Paris the CAC 40 dropped 2.21 percent to 2,950.47 points.

The euro dived at one point to $1.2288, a low last seen on July 1, 2010, before recovering to $1.2389 dollars, up from $1.2361 late on Thursday.

The dollar bought 78.17 yen, down from 78.33 on Thursday.

The closely watched US workforce figures were well below expectations of a 150,000 jobs increase and for the jobless rate to hold steady at 8.1 percent.

The data showed that a nascent recovery in the job market had stalled. In the first quarter, the average number of new jobs was 226,000, while in April and May, the average fell to 73,000.

The jobs numbers sent US stocks tumbling, with the Dow Jones Industrial Average dropping 1.80 percent to 12,170.45 points in midday trade.

The broad-based S&P 500 fell 1.95 percent to 1,284.81 points, while the Nasdaq Composite dropped 2.19 percent to 2,765.42.

The weak start to June came after a miserable May in which most markets gave up almost all the gains they had made since the turn of the year as the eurozone's debt crisis came back into sharp focus.

"It is an ugly beginning (for June) after an ugly month. Do we see more prospects of Fed monetary easing," Gekko Global Markets analyst Anita Paluch asked in reference to previous stimulus measures called quantitative easing by the US Federal Reserve.

"May's employment report clearly suggests that US labour market conditions are deteriorating again, which will undoubtedly prompt more speculation that QE3 is coming soon," added Paul Ashworth at Capital Economics.

Meanwhile in Asia, "China's manufacturing numbers overnight did nothing to quell the growing concerns that it might suffer a harder landing than previously forecast," said Rebecca O'Keeffe, head of investment at online brokerage Interactive Investor.

China said manufacturing activity grew at a much slower rate than expected in May, further confirmation that the world's number two economy was slowing rapidly after recent poor figures on trade, investment and industrial output.

The official purchasing managers index (PMI) fell to 50.4 from 53.3 in April, the China Federation of Logistics and Purchasing said in a statement.

A reading above 50 indicates expansion, while a reading below 50 suggests contraction. HSBC said its PMI for May stood at 48.4 compared with 49.3 in April.

The Chinese data helped to send Brent oil prices below $100 a barrel for the first time in eight months.

Also on Friday, data showed that eurozone unemployment stood at a record high of 11 percent, with Spain the hardest hit at 24.3 percent in April.

More than 17.4 million people were jobless in the 17-nation single currency area in April, as 110,000 more men and women joined unemployment queues, according to Eurostat data agency.

The news comes as Greece's political and economic future remains uncertain and Spain's banking sector looked increasingly fragile, stoking fears that debt-laden Madrid could need an international bailout.

With investors still seeking refuge in safe-haven assets, the yield on 10-year German and French bonds hit fresh record lows on Friday.

The rate of return for investors on 10-year German Bunds on the secondary bond market fell to 1.125 percent, and the yield on French 10-year bonds fell to 2.124 percent.

Spain's yield dipped late in the day to 6.424 percent from 6.536 percent at the close on Thursday, with the closely-tracked spread between German and Spanish borrowing widening to 5.48 percentage points at one point.

For a eurozone country such as Spain, an interest rate above 6.0 percent is considered dangerous territory with respect to its ability to refinance public debt.

Countries that had to pay 7.0 percent or more, including Greece, Ireland and Portugal, were forced to negotiate international bailouts.