European stocks hammered by mixed US jobs report

European stocks fell sharply Friday, giving back gains made the previous day, as a mixed US jobs report left investors guessing whether US interest rates would rise later this month.

London's FTSE 100 index dropped 2.15 percent to stand at 6,061.20 points in afternoon trading, while the CAC 40 in Paris fell 2.62 percent to 4,531.76 and in Frankfurt the DAX 30 tumbled 2.77 percent to 10,031.53. Both Frankfurt and Paris had fallen by more than 3 percent at one point.

European markets had shot sharply higher Thursday after the European Central Bank boosted market sentiment when president Mario Draghi said policy makers were ready to ramp up its contentious bond purchase programme -- known as quantitative easing -- if more stimulus is needed in the eurozone.

Also enjoying a respite from bad news from China, which had pummelled markets last week as trading there was closed for a long holiday weekend, the FTSE ended Thursday with a 1.82 percent gain, the CAC rose 2.17 percent and the
But market attention turned Friday to the US non-farm payroll data, with the information seen as possibly being key in the decision later this month by the US Federal Reserve to begin raising interest rates.

However the US economy generated a lower-than-expected 173,000 new jobs in August, but upward revisions to previous months' data sweetened the picture for hiring across the country.

The overall unemployment rate fell to 5.1 percent from 5.3 percent in July, hitting the lowest level since April 2008.

"August’s employment report is fairly mixed and can be used to make a case for or against a rate hike at the upcoming FOMC meeting," said Paul Ashworth, chief US economist at Capital Economics.

Investors have been weighing the likelihood of a Fed increase to zero-level interest rates this month or whether recent market volatility and a somewhat hesitant US recovery will convince policymakers to push it back several months.

"As far as we’re concerned, the September meeting is a 50-50 toss-up," added Ashworth.
Rob Carnell at ING bank said:  "We don’t think it is sufficiently strong enough for the Fed to proceed with a September rate hike without markets worrying that the data is not good enough to support it."

Dealer Jonathan Sudaria at London Capital Group said earlier that the US jobs data would push down the market no matter what.

"If it beats expectation, we’re going to sell off on the fears of a rate hike, and if it’s weak, it’ll be put down to another indicator of a faltering global economy," he said.

Wall Street stocks also tumbled in opening trade Friday on the US employment report.

Five minutes into trade, the S&P 500 was down 1.3 percent, the Dow Jones Industrial Average fell 1.4 percent, and the Nasdaq Composite shed 1.2 percent.

- Tokyo touches seven-month low -

Japanese stocks led a broad Asian stock slide Friday also on concerns of a US interest rate hike, with Tokyo's Nikkei index stumbling 2.15 percent to a seven-month low.

Among other Asian markets, Hong Kong gave up early gains to close 0.45 percent lower in late trade -- after returning from a one-day holiday -- while there were also losses of more than one percent in Seoul and
However, Sydney bounced back from early selling to end 0.25 percent higher.

The euro added to its sharp drop on Thursday when it lost a cent following the ECB's pledge to step up stimulus if necessary, slipping to $1.1109 from $1.1127 late in New York.

In European securities, shares in Unicredit plunged 4.9 percent to 5.60 euros after leaks to the media that the Italian bank could cut some 10,000 jobs, or nearly 7 percent of its workforce. The Milan market was down 3.02 percent.