PARIS: European stocks tumbled on Friday, ending a four-day rally, after data showed US employment growth ground to a halt in August, rekindling fears that the world's largest economy is slipping into recession.
The FTSEurofirst 300 index of top European shares ended 2.5 percent lower at 948.62 points, while German Bund futures rallied to record highs.
Industrials took a beating, with ABB down 4.6 percent and EADS down 3.8 percent, while banks also suffered, with Societe Generale down 6.7 percent and BBVA down 5 percent.
"It's a bit like 'take the cash and run' on the market. We see investors quickly getting out of equities and turning to safe havens such as gold and the Swiss franc . Asset managers have to protect their portfolios," said Fabrice Couste, head of CMC Markets France.
"Still, in this context, people can find opportunities for instance in stocks of companies that have strong pricing power or the ability to innovate."
Data showed US nonfarm payrolls were unchanged last month, the weakest reading since September, while economists had expected an increase of 75,000, according to a Reuters survey.
"The job figures are a disappointment, although the market had started to anticipate a bad number earlier in the session. At current level, the market is already pricing in a double-dip recession. Only a systemic crisis like in 2008 has not been priced in yet," Natixis strategist Benoit Peloille said.
Around Europe, UK's FTSE 100 index lost 2.3 percent, Germany's DAX index fell 3.4 percent, and France's CAC 40 shed 3.6 percent. VOLATILITY INDEX BACK ABOVE 40
"The non-farm payroll data today will be seen as a mixed blessing," said David Miller, Partner at Cheviot Asset Management, which has 3.5 billion pounds ($5.7 billion) in assets under management.
"Any increase would have been welcome because there has been little to celebrate in recent weeks, but poor data will be seen as further justification for a new bout of QE (quantitative easing)."
After failing to stay above the 38.2 percent Fibonacci retracement of its recent slump, the FTSEurofirst 300 dropped toward the 23.6 percent retracement, the last key support level before the index revisits two-year lows hit in August.
The Euro STOXX 50 volatility index known as VSTOXX index, one of Europe's main barometers of anxiety, jumped 10 percent to just above the psychological level of 40, signalling a sharp drop in investors' appetite for risky assets such as stocks.
Bucking the trend, Portuguese utility EDP surged 8.4 percent, boosted by growing interest from overseas peers in the privatisation of the state's 20 percent in the company, set to take place until the end of the year.
Copyright Reuters, 2011
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