The US economy added just 54,000 new jobs in May, confirming fears that the recovery has hit a soft patch as the unemployment rate ticked up to 9.1 per cent.

Non-farm payrolls rose far less than the 165,000 that economists polled by Bloomberg had expected and were well below the average 220,000 gain in the previous three months, the US labour department said. The unemployment rate rose by a tenth of a point from 9 per cent in April, disappointing hopes that it would fall back to 8.9 per cent, but the increase was due to an expanding labour force as more Americans searched for jobs.

In the face of a rising tide of grim economic reports in recent days, analysts had pared back their estimates for job creation but Friday’s figures were still far worse than all but the most bearish of economists had expected.

Futures on the S&P 500 fell sharply indicating markets would open 1.2 per cent lower following losses of almost 2.5 per cent over the previous two sessions.

London equities lost tentative intraday gains on Friday, as weak US jobs data unnerved riskier banking and mining stocks crucial to the FTSE 100’s chances of breaking out of its well-worn trading range.

European equity markets followed their global peers lower as investors adjusted portfolios to the prospect of slowing global growth following recent data disappointments.

Spain’s successful bond auction ensured the Madrid Ibex index outperformed, falling 0.8 per cent, but this bore little impact on the pan-European FTSE Eurofirst 300 which slid 1.2 per cent to 1,117.09.

The weightiest of the losses came from the resources sectors. The Eurofirst mining sector fell 2.2 per cent, while oil producers were lower on the possible outcome of next week’s Opec meeting. The oil cartel is expected to discuss increases to output quotas, which could drive the price of oil lower.

Meanwhile, Chinese data have recently indicated Beijing’s attempts to take some of the heat out of China’s economy have been successful. The gloomy mood followed continued falls across much of Asia earlier in the session.