updated 5/7/2010 12:42:22 PM ET 2010-05-07T16:42:22

A strong set of U.S. jobs data Friday failed to shore up confidence in world markets as stocks plunged again amid mounting fears that Europe's debt crisis could spread and derail the global economic recovery.

In Britain, where investors were also grappling with uncertain general election results, the FTSE 100 index slid 137.97 points, or 2.6 percent, at 5,123.02, while the pound oscillated wildly.

Germany's DAX slid 193.17 points, or 3.3 percent, at 5,715.09 while the CAC-40 in France was 144.66 points, or 4.1 percent, lower at 3,416.27.

And on Wall Street, the Dow Jones industrial average plunged 157.19 points, or 1.5 percent, at 10,363.13 around midday New York time while the broader Standard & Poor's 500 index tumbled 18.86 points, or 1.7 percent, at 1,109.29.

There had been hopes that Wall Street would trade higher after strong U.S. jobs data helped push other concerns, primarily centered on Europe's debt crisis, aside — for a while.

Figures from the U.S. Labor Department showed that employers expanded payrolls by 290,000. That's the most in four years and more than the 200,000 anticipated. However, the jobless rate rose to 9.9 percent from 9.7 percent, mainly because 805,000 job seekers — perhaps feeling better about their prospects — resumed their searches for work.

Though the data showed the U.S. economy started the second quarter of the year robustly, economists warned that the debt crisis, among other issues, could change everything.

"Under these circumstances, the fear factor is palpable and risk aversion remains the order of the day," said Michael Woolfolk, senior analyst at Bank of New York Mellon. "The silver lining to this dark cloud is that the global economy outside of Europe continues to recover."

Friday's stock market declines come a day after dramatic events on Wall Street, when the Dow Jones industrial average fell by 1,000 points at one stage, though it did recover to end "only" 347.8 points lower.

The primary focus in the markets though remains on whether the trouble in the eurozone will spread from Greece.

Many economists say Greece may be insolvent in the end despite an EU-IMF bailout, and there are fears that other countries will face bond market skepticism — and higher borrowing costs that will worsen their finances in a vicious spiral. That could undermine markets and consumer confidence just as Europe crawls out of recession.

Finance ministers from the Group of Seven nations have held a teleconference to discuss the situation.

Stock markets weren't alone in seeing massive swings — in the currency markets, at one stage earlier the dollar was down a massive 6 yen at 88.68 yen one stage, while the euro dropped to $1.2520, its lowest level in 14 months. The retreats were reversed and the dollar was trading 0.8 percent higher on the day at 91.52 yen, while the euro was up 0.6 unchanged at $1.27.

As if all that wasn't enough, investors, particularly in London, had to grapple with the inconclusive outcome of the British general election.

With the counting of the votes coming to an end, it's clear than no party has won enough seats to control Parliament. Without an overall winner, the parties are assessing the situation to see if any alliances can be concluded or whether the Conservative Party, which won the most seats and votes, will go it alone.

The uncertainty was most evident in the currency markets where the pound tumbled 1.8 percent to a year low of $1.4481 at one stage before recovering somewhat to be trading 0.4 percent lower on the day at $1.4693.

"The longer that any horse trading goes on between the parties, and the more fragile any agreement is perceived to be, the more that sterling, gilts (British government bonds) and equities are likely to suffer," said Howard Archer, chief U.K. economist at Global Insight. "The markets hate uncertainty, so the markets will be particularly concerned if they sense that the new government could fall at any time."

Across Asia, stocks were hit hard even though the government debt crisis is centered on Europe — all the main indexes ended lower with Taiwan, Indonesia, Thailand and New Zealand down sharply. China's Shanghai Composite Index closed 1.9 percent lower while Hong Kong's Hang Seng index ended around 1.1 percent down.

The most dramatic retreat was seen on Japan's benchmark Nikkei index, which closed 3.1 percent down at 10,364.59

Oil markets were also oscillating wildly — benchmark crude for June delivery was down $1.81 to $75.30 a barrel in electronic trading on the New York Mercantile Exchange. That fall comes on top of Thursday $2.86 slide.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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