US employers cut a more-than-expected 190,000 jobs in October and the jobless rate soared to 10.2 per cent, the highest since April 1983.
This snuffed out tentative optimism that the global economy may see a swift and sustained recovery, clouding the demand outlook and hitting equity and commodity prices. On hold "Should be good for the dollar on risk aversion trade. The Fed will stay on hold even longer with less likelihood of giving a concrete answer to when and how to withdraw quantitative easing. The revision is good but the real shocker is the unemployment rate."
The MSCI world equity index was down 0.1 per cent, retreating from earlier gains. European stocks fell sharply with the FTSEurofirst 300 index down 0.9 per cent.
US stock futures were sharply lower with S&P 500 index futures down 0.8 per cent. The December Bund future marked a session high of 121.35 after the release of US non-farm payrolls data. By 1351 GMT, the contract was up 33 ticks on the day at 121.34 compared with 120.94 before the figures were published.
The two-year Schatz yield was down 4.2 basis points on the day at 1.277 per cent versus 1.313 per cent earlier.
Oil prices fell by more than two per cent yesterday after the unemployment numbers emerged to shake financial markets.
US crude for December delivery was down $1.86 to $77.86 a barrel by 1420 GMT, retracing early gains as high as $80.34 in the trading session.
London Brent crude fell $1.70 to $76.29. Analysts polled by Reuters had predicted a cut of 175,000 jobs, the smallest number for 14 months, and a rise in the overall jobless rate to 9.9 per cent.
In early trade market participants sent oil back up to around $80 a barrel in anticipation of bullish data, but the bearish figures crossed a psychological threshold of 10 per cent for markets.
"There was a lot of talk early in the market that the number would come in lower, but really we're just kicking the can down the road here, and today's numbers have set risk markets on edge," said David Morrison, market strategist at GFT GLobal
"It's the old cliche, but the 10 per cent number really was a key line in the sand." Oil prices have risen from a low of less than $33 a barrel last December to a high for this year of $82 in October.
They were on course to gain nearly four percent this week, but market sentiment had been cautious following inventory data earlier in the week showing oil stocks at record supply levels.
Inventories of distillates, which include heating oil and diesel are near their highest levels in 26 years.
Sharp rise Since the start of the recession in December 2007, the number of unemployed persons in the US has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.
The number of long-term unemployed (those jobless for 27 weeks and over) was little changed over the month at 5.6 million. In October, 35.6 per cent of unemployed persons were jobless for 27 weeks or more.
Construction employment decreased by 62,000 in October. Manufacturing continued to shed jobs (minus 61,000) in October, with losses in both durable and nondurable goods production. Retail trade lost 40,000 jobs in October.
Health care employment continued to increase in October (29,000). Since the start of the recession, health care has added 597,000 jobs, the report said. 
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