European shares fell more than two per cent yesterday after soft US jobs data and near-record oil prices fuelled fears the economic recovery was faltering, but bid talk lifted British bank Barclays.
Stocks tanked after figures showed US employers added a paltry 32,000 workers to payrolls last month, far less than the 228,000 expected by Wall Street economists.
"This weak number calls into question everything the market priced in terms of monetary tightening," said Chloe Magnier from CIC Securities in Paris.
While the Federal Reserve was still likely to raise interest rates by a quarter point next week, it may be the last rise before December, she said.
"High oil prices and slow job creation are not going to throw the economy into a recession or a double dip, but validate a scenario of pause in the recovery with mildly slower growth in the second half of the year."
By 1600 GMT, the FTSE Eurotop 300 index of pan-European blue chips had unofficially closed 2.1 per cent lower at 956.4 points, its lowest close this year.
"We've been probing the bottom end of the range for a good month now," said Edward Menashy, an economist at stockbrokers Charles Stanley.
Ongoing issues weighing on stocks included rising interest rates, climbing oil prices, high levels of debt and the risk of the Chinese economy overheating.
Corporate results had not disappointed, however, and the economic soft patch could prove short-lived, he said.
"We are going through a transient period where there is a lot of weakness, but thereafter there should be a pick-up."
Turnover was solid with €2.9 billion traded on the Eurotop 300, where 13 stocks fell for each one that rose.
The narrower DJ Euro Stoxx 50 index sank to 2,617.7 points, its lowest since November last year and closed down 2.6 per cent at 2,618.7 points.
Wall Street also tumbled, extending a hefty sell-off during the previous session. The blue-chip Dow Jones industrial average eased 0.7 per cent to 9,888.2 points while the Nasdaq Composite Index shed 1.2 per cent to 1,800 points.
The dollar dived and bonds soared as investors wound back expectations of aggressive US interest rate tightening.
Around Europe, London's FTSE 100 closed 1.7 per cent weaker, while Paris's CAC-40, Zurich's SMI and Frankfurt's DAX all closed more than 2 percent lower.
High oil prices continued to plague shares, with US crude futures hovering near $44 a barrel after a fire at a big US refinery and fresh problems at Russian oil giant YUKOS highlighted the strain on world supply.
High-volume fuel users suffered, with airlines taking a battering. British Airways and Air France-KLM both dived 6 percent.
All sectors ended lower but those most highly exposed to the economic cycle fared worst, with the media, technology and auto sectors heading declines.
Technology bellwether Nokia closed down 3.8 per cent to 9.18 euros, having fallen as far as €9.12, its lowest in nearly six years.
Barclays bucked the weaker trend as dealers cited talk of a possible bid by Citigroup at 700 pence per share. Citigroup and Barclays both declined to comment but a source familiar with the situation poured cold water on the possibility of a Citigroup bid.
Barclays shares, which had rallied as much as 11 per cent to a six-month high of 535 pence, trimmed gains to end 3.9 per cent higher at 500 pence.