In Europe, the FTSE 100 index of leading British shares closed down 89.37 points, or 1.7 percent, at 5,121.81 while Germany's DAX sank 124.55 points, or 2.1 percent, to 5,930.08. The CAC-40 in France was 110.72 points, or 3.1 percent, lower at 3,446.62.

On Wall Street, the Dow Jones Industrial Average slumped 220.15 points, or 2.2 percent, at 10,035.13, while the broader Standard and Poor's 500 index dropped 22.10 points, or 2 percent to 1,080.73.

Those levels marked a big reversal from earlier, when sentiment was fairly buoyant as a run of strong US economic data had stoked hopes about the monthly US jobs data. In addition, payroll figures often set the tone for markets for the next week or two.

Friday's jobs disappointment comes at the end of a week when stocks have enjoyed some of their biggest gains this year, as trading was steered by something other than the European debt crisis.

The US jobs data also affected currency markets — at times of risk aversion, the dollar often gets supported in its presumed status as a safe haven currency.

By mid-afternoon London time, the euro was down at $1.2011, after trading briefly below $1.20 for the first time since March 2006.

The jobs data also had a negative impact on oil prices.

Oil fell more than 3 percent on Friday, sliding below $72 a barrel. US crude for July was down $2.80, or 3.75 percent, at

$71.81 a barrel at 12:11 p.m. EDT (1611 GMT), dropping as low as $71.62 from an early $75.42 peak. ICE Brent was down $2.73 at $72.68.

US crude ended 2.4 percent higher on Thursday to settle at $74.61, the highest settlement for a front-month contract since May 12, supported by statistics showing crude inventories fell last week by more than forecast.

On Friday, US crude tested and then pushed below support at Thursday's $72.32 low as the euro fell below the key $1.20 level, a four-year low, and then tested below support at Tuesday's $71.64 low.

Further hurting sentiment in Europe were comments from the Hungarian government, which said its economy is in a "grave" situation. The comments raised fears among investors that the country may be hit by a Greek-style debt crisis and pushed towards default. The forint and local equity markets dropped sharply and borrowing costs jumped higher.

Elsewhere, investors are keeping a close eye on the meeting of the Group of 20 finance ministers and central bankers in South Korea, for any indications that splits have emerged about economic policy now that the global recession has ended.

Gareth Berry, an analyst at UBS, said fiscal consolidation and economic growth are likely to be the key subjects for the G-20 but that "talk of financial regulation could dampen any burgeoning risk sentiment for now."

Earlier in Asia, Japan's Nikkei 225 stock average fell 13 points, or 0.1 percent, to 9,901.19 amid news that Finance Minister Naoto Kan had been elected prime minister, replacing the deeply unpopular Yukio Hatoyama ahead of upper house elections in July.

In Hong Kong, the Hang Seng index shed 6.64, or less than 0.1 percent, to 19,780.07 while Australia's benchmark retreated 0.8 percent to 4,449.40. South Korea's Kospi advanced 0.1 percent to 1,664.13 and markets in Singapore, Thailand and the Philippines also gained.

China's Shanghai Composite Index closed flat at 2,553.59 amid concerns that rapid economic growth might slow if Europe's debt troubles hurt demand for exports.