LONDON (AFP) ? Surprisingly robust US jobs data sparked only a brief rebound on Wall Street and in Europe on Friday, leaving investors scarred from a week of heavy losses brought on by slow growth and eurozone debt concerns.
European stock markets initially dived 3.0-4.0 percent after heavy falls in Asia, and rally quickly lost steam following the announcement that the US economy gained a net 117,000 jobs in July.
London's FTSE-100 index closed down 2.71 percent to 5,246.99 points for a weekly loss of 9.8 percent, wiping nearly ?150 billion ($246 billion, 173 billion euros) off its total value over the last five days.
In Frankfurt, the DAX dropped 2.78 percent to 6,236.16 points, dropping 13.3 percent over the week.
In Paris, the CAC-40 slid 1.26 percent to 3,278.56 points to chalk up a record 10th consecutive daily loss. It lost 10.7 percent over the week.
In highly volatile trading, Madrid and Milan rebounded for part of the day on rumours that that the European Central Bank was preparing to buy hard-hit Spanish and Italian bonds, before falling back.
Madrid ended the day down 0.18 percent and dropped 10 percent over the week, while Milan fell 0.70 percent on Friday and lost 13.12 percent for the week.
Wall Street also opened higher on the surprisingly strong jobs data, but the rally quickly fizzled.
The Dow Jones Industrial Average had dropped 1.9 percent to 11,168.17 points at 1600 GMT, and was down 8.03 percent from the previous week's close.
The broader S&P 500 was down 2.5 percent to 1,198.67 points, while the tech-heavy Nasdaq Composite slumped 3.4 percent to stand at 2,470.17 points.
"The reality of a global economic contraction seems to have finally kicked in as the markets continue to plummet," said Manoj Ladwa, senior trader at ETX Capital in London.
"Investors are pricing in a slowdown in growth and sovereign debt problems as equities drop across the board," he added.
China said that debt-reduction announcements in Europe and the United States, where the permitted ceiling was again raised, would not be enough to save their respective economies.
"Concrete steps" must be taken to rebalance the global economy, said a commentary published by the official Xinhua news agency.
Asian stock markets closed sharply lower on Friday as already-fragile investor confidence was hammered by more weak US economic data on Thursday and a warning from the head of the European Commission that the eurozone debt crisis had spread from peripheral countries to mainstay economies such as Italy.
Tokyo tumbled 3.72 percent, Sydney slumped 4.0 percent and Taipei dived 5.58 percent. Fear swept across Asia from the United States, where the Dow Jones Industrial Average on Thursday suffered its worst one-day drop since December 2008.
"We're seeing the erosion and now the loss of confidence, confidence in the economy, confidence in the market, confidence in the policy makers. It's all showing up," said US-based Hugh Johnson, of Hugh Johnson Advisors.
The latest front cover of the Economist publication meanwhile carried the headline: 'Time for a double dip?' -- with the respected magazine questioning whether the US will fall back into recession.
A double-dip recession refers to a short-lived recovery from one recession and then a new plunge back into economic contraction.
"While we are not looking for a global recession, which is a surprisingly rare event, there is a lot of confusion out there," said Kathleen Brooks, an analyst at Forex.com traders.
"The markets staged impressive rallies over the last two years on the basis that global growth would bounce back. However, the recovery has been shallower than expected and now the markets have to re-adjust.
In the foreign exchange market, the euro rose slightly to buy $1.4157 at 1600 GMT from $1.4106 late on Thursday.
The dollar also slid against the yen, buying 78.48 yen against 78.93 late on Thursday.
Rumours that the ECB was buying Italian and Spanish govern bonds helped bring down yield and risk spreads, which had surged this week.
The yield on 10-year Italian bonds fell to 6.081 percent from 6.189 percent on Thursday, while the risk premium over safe-bet German bonds fell 375 basis points after hitting a fresh record at the beginning of trading.
Spanish 10-year bonds yielded 6.032 percent against 3.271 percent on Thursday, with the spread over German bonds dropping to 370 basis points.
The yield on 10-year German Bunds rose to 2.345 percent from 2.299 percent on Thursday.
French 10-year bonds yielded 3.255 percent, compared to 3.123 percent on Thursday, for a spread of 80 basis points above German Bunds.
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