LONDON: Stock markets slid Friday as better-than-expected non-farm payrolls data in the United States clouded investors' hopes for steep cuts in interest rates in the world's biggest economy.
Among Europe's leading blue-chip indices, Frankfurt's DAX, Paris's CAC 40 and London's FTSE were all down by around half a percent in mid-afternoon trade.
On the other side of the Atlantic, Wall Street also shed around 0.5 percent.
Normally, financial markets should take heart from a stronger US economy, to which the latest jobs data testify -- with 224,000 new positions being created last month, well in excess of forecasts.
And the dollar benefitted, rising against all other major currencies.
However, with the US unemployment rate moving slightly higher and average earnings growth falling short of expectations, "the jobs data is certainly a mixed bag," said FXTM trader Ariana Demian.
"Today's report is likely to complicate the Federal Reserve's decision to cut interest rates this month, especially if economic conditions in the United States continue to stabilize leading up to the Fed policy meeting" later this month, she said.
Investors' are currently focussed on how far the Fed is going to cut borrowing costs to avert a downturn further down the road.
Some suggest the strength of the jobs data could throw doubt on the magnitude of the anticipated easing or possibly whether there will be any more rate cuts at all.
ING economist James Knightley said he was still pencilling in a reduction by the Fed -- of a quarter of a percentage point both in July and September.
However, "the market is looking for more -- pricing in three rate cuts this year with a further 25-basis-point cut in early 2020," Knightley said.
OANDA analyst Edward Moya was also certain that a modest rate cut was still on the cards.
"Despite the strong rebound in jobs and steady wages, the Fed will still likely deliver a 25-basis point insurance cut at the end of the month," he said.
"For the Fed to consider a 50-basis-point cut, we will need to see the July 26th second quarter advance GDP reading deliver a sub-2.0 percent reading."
Uncertainty over the China-US trade row, which had weighed on market sentiment at the start of the week, has been put aside for now, traders said, but could come back into focus later as it weighs on the global economic outlook.
Another factor behind the weakness in stock prices on Wall Street on Friday could also be that investors were playing catch-up after it was closed for the Independence Day celebrations on Thursday, traders said.
Oil prices fell as investors continue to fret over the impact of weak global growth on demand, which is overshadowing this week's agreement by OPEC and Russia to extend their output caps.
Even the US-Iran crisis has been unable to perk up the commodity, with news that Britain had intercepted an Iranian oil tanker near Gibraltar -- suspected of carrying crude to Syria -- providing no support.
Washington praised the move but Tehran called it an "illegal interception", adding to geopolitical tensions. —AFP
