NEW YORK (Reuters) - U.S. and European shares, the dollar, oil and bond yields all dived on Friday after data showed the slowest pace of U.S. job growth in more than five years, dashing expectations that the Federal Reserve could raise interest rates in June.
U.S. nonfarm payrolls rose by just 38,000 in May, the smallest gain since September 2010 and far below an expected 164,000. All 105 economists polled by Reuters had expected a higher number.
Wall Street's top banks unanimously expect the Fed to leave rates unchanged when its policymakers meet this month in the wake of the U.S. jobs report, results of a Reuters poll showed on Friday.
"This monthly report and the revisions to the past few months show that the labor market is not nearly as strong as many believed, so I think it takes June off the table," said Chris Gaffney, president of EverBank World Markets in St. Louis.
U.S. shares pared losses but still ended lower, while European stocks reversed gains. The dollar hit its lowest in more than three weeks against a basket of major currencies, and benchmark 10-year U.S. Treasury yields hit 1.697 percent, their lowest in more than eight weeks. A fall in bank stocks led the dip in U.S. shares, with the S&P 500 financial index <.spsy> ending 1.38 percent lower. Europe's auto sector index <.sxap> ended 2.3 percent lower as the euro rallied against the dollar .MSCI's all-country world equity index <.miwd00000pus> was last up 1.38 points, or 0.34 percent, at 403.87.The Dow Jones industrial average <.dji> ended down 31.5 points, or 0.18 percent, at 17,807.06. The S&P 500 <.spx> closed down 6.13 points, or 0.29 percent, at 2,099.13. The Nasdaq Composite <.ixic> ended down 28.85 points, or 0.58 percent, at 4,942.52.Europe's broad FTSEurofirst 300 index <.fteu3> closed 0.85 percent lower at 1,339.47 after gaining around 0.7 percent before the U.S. data.The plunge in U.S. 10-year yields marked the biggest one-day fall since early February, while U.S. two-year note yields posted their biggest one-day tumble since March 2009.Fed funds futures, based on the CME Group's FedWatch, moved to price in a 6 percent perceived chance of a June rate hike after the U.S. jobs report, down from 21 percent late Thursday. The dollar index, which measures the greenback against a basket of six major currencies, was last down 1.69 percent at 93.945 <.dxy>."The Fed rhetoric which pushed hard to convince the market that they will move in the coming few meetings just hit a wall," said Marvin Loh, global markets strategist at BNY Mellon in Boston.The U.S. jobs numbers, along with weekly industry data showing U.S. drillers added rigs for only the second time this year, weighed on oil prices. Brent crude settled down 40 cents, or 0.80 percent, at $49.64 a barrel. U.S. crude settled down 55 cents, or 1.12 percent, at $48.62 a barrel.Spot gold surged 2.8 percent and was on track for its biggest one-day jump in three and a half months. (Additional reporting by Dion Rabouin and Gertrude Chavez-Dreyfuss in New York; Editing by Nick Zieminski and James Dalgleish)