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 benchmark FTSE 100 index dropped 2.44 percent to close at 6,042.92 points. the CAC 40 in Paris sank 2.81 percent to 4,523.08 points, while Frankfurt's DAX 30 lost 2.71 percent to end at 10,038.04 points.

Market attention was on the US non-farm payroll data, with the information seen as possibly being key in the decision about whether to raise rates when the US Federal Reserve meets in less than two weeks.

The US Labor Department report showed the economy added 173,000 jobs -- fewer than estimated.

However, the previous two months' job gains were revised upward, pushing the unemployment rate down more than expected to 5.1 percent in July, its lowest level since April 2008.

"There was something for everyone in Friday's US Employment Report, which probably explains why there was little change in the financial markets once the dust had settled," said John Higgins, analyst at Capital Economics.

"Given the lack of a clear steer from the report, we continue to think that the probability of US monetary policy being tightened later this month is around 50:50," he said.

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.

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."

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

Near mid-day in New York, the S&P 500 was down 1.47 percent, the Dow Jones Industrial Average fell 1.45 percent, and the Nasdaq Composite shed 1.03 percent.

- Tokyo touches 7-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 Singapore.

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 $1.1114 from $1.1127 late in New York.

In European securities, shares in Unicredit plunged 4.05 percent to close at 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 finished down 3.18 percent.

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