- Employment "pulling the emergency brake"

- Downbeat UK PMI

The hotly anticipated non-farm payrolls jobs has sent investors reeling after the number of jobs added in May came in way below expectations, and the unemployment rate rose to 8.2 percent from 8.2 percent.

General sentiment ahead of Friday’s data release from the Labor Department, a survey of economists for Bloomberg news had projected an increase in jobs to 150, 000 following April’s additional 115, 000 workers. The group also predicted that the unemployment rate would hold at 8.1 percent.

Employment ‘pulling the emergency brake’

The previous two reports – which also came in below economist expectations – blamed the unseasonably warm weather for the reduction, but this latest disappointment seems to suggest a more fundamental weakness in the health of the economy. "It's painfully obvious the economic recovery in the U.S. isn't just slowing down, it's pulling up the emergency brake. And, lack of job creation isn't the only critical concern. Wages/Income is sharply lower," Todd Schoenberger, managing principal The BlackBay Group in New York told CNBC.

"For those lucky enough to have a job, their spending power is sliding when accounting for inflation. The markets will respond negatively to this report," he added.

And respond negatively they did. The dollar slumped against the yen, hitting a session low after the report was published. USD fell as low as 77.65 yen, a new 3-1/2-month low according to live forex charts. It was last down 0.9 percent at 77.66 yen, compared with 78.10 yen before the data.

The euro last traded down 0.2 percent at $1.2333, compared with $1.2325 before the data. The euro initially fell to a session low of $1.2293 before retracing some losses.

Downbeat UK PMI

European markets had already been sent plunging Friday morning on weak UK Manufacturing PMI data which showed a drop to 45.9 in May, from 50.2 in April. This represented its lowest level since 2009 and the pound was sent skidding down live forex charts. GBP hit a four-month low of 119.50 against the yen and a fresh 4-1/2-month low of 1.5278 against the US dollar, compared to yesterday's close of 120.68 and 1.5408, respectively. The next downside target level for the pound is seen at 119.00 against the yen and 1.525 against the greenback.

The German DAX 30 and the French CAC 40 also fell by -2.00% and -1.40%, while the Italian FTSE MIB and Greece lost -0.60% and -4.40%. The British FTSE 100 lost -0.40% after the disappointing data which is thought to be a result of scaled back production and employment inflows thanks to general market nerves over the economic stability of markets broth abroad and at home.

Coupled with fresh fears over the future of China’s growth potential, investor sentiment had already suffered a body blow Thursday when weak private sector job growth was announced, undercutting economist predictions by around 6K. With worries swelling over the state of the global economy, another weak employment report in the U.S. adds to fears that a sharp slowdown is on the way.

Sarah Cox, Staff Writer