Global stocks fell, the euro hit a two-year low against the dollar and oil slumped more than 3 per cent on Friday after disappointing U.S. jobs growth reinforced worries the American economy was mired in a slow-growth rut.
The U.S. Labour Department reported that employers created only 80,000 jobs in June, far fewer than needed to bring down the 8.2 per cent unemployment rate and adding to evidence that Europe's debt crisis was weighing on global growth.
Although the jobs creation was weaker than expected, many investors said it was not bad enough to spur the Federal Reserve to launch a third round of quantitative easing.
"This isn't disappointing enough for QE3, but it suggests an extended period of sluggish growth and limited improvement on the jobs front," said Eric Teal, who helps oversee $4.5 billion as chief investment officer at First Citizens Bancshares Inc in Raleigh, North Carolina.
Though Fed action might cheer some investors, many doubt the ability of central banks to lift the economic gloom. More than two-thirds of companies traded on both the New York Stock Exchange and Nasdaq fell.
Commodities prices tumbled as the jobs data fueled worries about the global economy and the demand for raw materials. In addition to the slump in oil prices, copper lost 2 per cent and gold 1 per cent, pushing the 19-commodity Thomson Reuters CRB index .CRB to its worst performance since December 15.
U.S. and German government bond prices jumped as investors sought safe havens.
The U.S. jobs data came a day after the European Central Bank cut interest rates, further dampening the euro's appeal, and China and the Bank of England announced more monetary easing.
With U.S. interest rates already near zero the loosening of monetary policy in Europe and China diminishes the relative interest rate advantages held over the greenback.
The euro fell 1 per cent to a two-year low of $1.2264 before rebounding to $1.2296, off 0.77 per cent. The dollar rose to a 1-1/2-year high against the Swiss franc.
"Politically and economically, it is not the environment for the euro to rally. ... In a week or a month's time, it can easily get back down towards below $1.2280 and maybe even head towards $1.20," said Kathleen Brooks, research director at FOREX.com in London.
At the close on Wall Street, the Dow Jones industrial average .DJI was down 124.20 points, or 0.96 per cent, at 12,772.47. The Standard & Poor's 500 Index .SPX was down 12.90 points, or 0.94 per cent, at 1,354.68. The Nasdaq Composite Index was down 38.79 points, or 1.30 per cent, at 2,937.33.
The jobs report followed other bleak news earlier this week that U.S. manufacturing shrank in June and service sector growth slowed to its lowest level since January 2010.
European shares posted their worst one-day fall in around two weeks, with the FTSEurofirst 300 index closing down 1 percent at 1,033.77 points. World stocks ended down 1 per cent.
Spanish borrowing costs rose back above the 7 per cent danger level on Friday as the impact from last week's European Union summit faded and the ECB's rate cut on Thursday did little to restore investor appetite for riskier assets.
U.S. crude oil closed down $2.77 at $84.55 per barrel. Copper futures in London fell $165 to $7,530 a tonne.
Benchmark U.S. 10-year Treasury notes were last up 17/32 in price to yield 1.541 per cent, the lowest since June 5. Two-year German bond yields, hit negative territory for the first time on record.