Stocks slid and the dollar surged on Friday after US jobs data showed only a timid slowdown in the labour market, setting the stage for further aggressive interest rate hikes.
Equity markets have taken a battering in the past couple of months, as the US Federal Reserve has made it clear it intends to continue to aggressively raise interest rates until soaring inflation is tamed, even if that means sending the economy into a recession.
There was a brief rebound at the start of the week when investors hoped data pointing to an economic slowdown would allow the Fed to "pivot," or slow down rate hikes.
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However, the jobs report shows the US labour market is still robust, with hiring in the US economy slowing only slightly in September, to a net gain of 263,000 jobs, from 315,000 in August.
That was more than the consensus forecast for a net gain of 250,000, sending equities lower and the dollar higher.
"Those hoping for a Fed pivot have been sorely disappointed with today's job numbers, which have confirmed that (the) US economy continues to rumble along quite well," said Chris Beauchamp, chief market analyst at online trading platform IG.
"The latest bear market bounce has now begun to wilt as investors wearily return to expectations" of further Fed rate hikes.
Futures markets show investors saw the report as boosting the odds that the Fed will again undertake a 0.75 percentage point interest rate increase in November.
Major US indices were in the red the entire day, with the broad-based S&P 500 finishing 2.8 per cent lower.
In Europe, Frankfurt fell 1.6 per cent, and Paris shed 1.2 per cent. London ended the day 0.1 per cent lower.
"Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy, but also that the better-than-expected data shows that the jobs markets haven’t slowed enough to stop the Fed from hiking rates aggressively," said markets analyst Susannah Streeter at Hargreaves Lansdown brokerage.
The next data point that the Fed, and investors, will be scrutinizing is the consumer price index report next week.
Elsewhere, oil prices jumped and were set for their biggest weekly gain since March after OPEC and other major producers led by Russia agreed to slash daily output by two million barrels.
Key figures around 2030 GMT
New York - Dow: DOWN 2.1 per cent at 29,296.79 (close)
New York - S&P 500: DOWN 2.8 per cent at 3,639.66 (close)
New York - Nasdaq: DOWN 3.8 per cent at 10,652.40 (close)
London - FTSE 100: DOWN 0.1 per cent at 6,991.09 (close)
Frankfurt - DAX: DOWN 1.6 per cent at 12,273.00 (close)
Paris - CAC 40: DOWN 1.2 per cent at 5,866.94 (close)
EURO STOXX 50: DOWN 1.7 per cent at 3,375.46 (close)
Tokyo - Nikkei 225: DOWN 0.7 per cent at 27,116.11 (close)
Hong Kong - Hang Seng Index: DOWN 1.5 per cent at 17,740.05 (close)
Shanghai - Composite: Closed for a holiday
Pound/dollar: DOWN at $1.1082 from $1.1162 on Thursday
Euro/dollar: DOWN at $0.9743 from $0.9791
Euro/pound: UP at 87.987 pence from 87.71 pence
Dollar/yen: UP at 145.38 yen from 145.14 yen
Brent North Sea crude: UP 3.5 per cent at $97.92 per barrel
West Texas Intermediate: UP 4.7 per cent at $92.64 per barrel
