NEW YORK - Stocks on major exchanges fell on Friday and the euro hit five-week lows after US jobs data for June came in weaker than expected, fuelling concerns that Europe's debt crisis is deepening a slowdown in the US economy.
Expectations rose that the Federal Reserve would have to resort to more monetary easing to revive US growth. But that did not stop the dollar from surging amid the flight from risk.
Oil and copper prices fell, along with gold. US and German government bond prices leapt, with investors seeking safe havens in US Treasuries and German Bunds.
The Labour Department said US non-farm payrolls expanded by just 80000 jobs in June, falling short of forecasts. A Reuters poll showed the market expected 90000 additional jobs.
The data raised pressure on the Fed to launch a third round of quantitative easing. The first two rounds involved large-scale Treasuries buying, aimed at lowering long-term interest rates.
"After this, we can expect some Fed action at their next meeting. There is the anticipation but at the same time, we know that the Fed is running out of weapons," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.
The next meeting of the Fed's monetary policy committee is scheduled for July 31 to August 1.
Futures traders added to bets that the Fed will keep short-term interest rates near zero until the end of 2014.
Fed fund futures, tied to the overnight lending rate between banks, ticked up after the jobs report, signalling traders see the Fed first hiking rates in the fourth quarter of 2014, either at its October or its December meeting of that year.
The Dow Jones industrial average was down 155,46 points, or 1,21%, at 12741,21. The S&P 500 index was down 14,70 points, or 1,07%, at 1352,88. The Nasdaq composite index was down 38,88 points, or 1,31%, at 2937,24.
European shares fell further after the jobs data, down 0,8% on the day, having been 0,2% lower beforehand. World stocks fell 1%.
The euro extended losses to a five-week low against the dollar, sliding 0,6% to $1,2315 after falling as low as $1,2298.
Monetary policy loosening by a trio of major central banks failed to impress investors on Friday. They pushed Spanish borrowing costs back up to unsustainable levels reached before last week's European Union summit took measures designed to ease pressure on Spain's debt.
China, the eurozone and Britain all loosened monetary policy on Thursday, signaling growing alarm about the world economy - but to little avail.
The 19-commodity Thomson Reuters-Jefferies CRB index was headed for its sharpest loss in a week as oil and copper prices fell about 2% each.
Gold slid more than 1% in choppy trade as investors turned to the perceived safety of the dollar. The spot price of gold, which tracks trades in bullion, was at $1590,76/oz, down from $1604,33/oz at Thursday's close.
US Treasuries' benchmark 10-year note yields were at 1,5508%, their lowest in four days. Safe-haven German Bund futures hit a session high.