Markets extend losses

North American stock markets extended their sell-off Friday, despite encouraging employment numbers in both Canada and the United States.

Fears of a widening sovereign debt crisis in Europe overshadowed the positive economic news where job growth came in far above expectations.

Finance MinisterJim Flaherty said he has discussed with several Canadian bank CEOs their exposure to the European debt crisis and told journalists he understands it to be "small and contained."

'We're monitoring this carefully.' Finance Minister Jim Flaherty

He said he has been in close contact with other G7 finance ministers to discuss the risk of possible contagion from Greece.

"We're very much engaged on this through the G7 and through the G20 and we're monitoring this carefully," Flaherty said.

In Toronto, the S&P/TSX composite index finished down 150 points or 1.3 per cent, to 11,692.43.

In New York, the Dow Jones industrial average ended down 139.89 at 10,380.43. The broader S&P 500 fell 17.27 points to 1,110.88 and the Nasdaq was off 54 to 2,265.64.

Canada added 108,700 jobs in April, and U.S. employment grew at its fastest pace in four years,with 290,000 jobs createdlast month.

TheCanadian jobs dataencourageda dollar rebound from three days of losses, as traders bet that the employment news wouldlead the Bank of Canada to increase interest rates in June, earlier than expected.

The Canadian dollar's official close Friday was 95.80 cents US, up 0.77 of a cent.

Investorswere still rattled by Thursday's sell-off on Wall Street at one stage, the Dow Jones industrial average was in freefall, trading 1,000 points lower.

Meltdown causes havoc in trading pits

For a sense of how traders responded to that meltdown, listenhereto audio posted anonymously on the internet.

Oil for June delivery closed down $2to $75.11 US a barrel. Gold for June delivery soared, finishing up$13.10 US to $1,210 US an ounce.

World stock marketsdeclinedFridayover continued fearsabout European debt after Thursday'swild swings in North American markets.

In Britain, where investors were grappling with uncertain general election results, the FTSE 100 index closed down 137.97 points, or 2.62 per cent, at 5,123.02 following a slide in the pound.

British Conservative Leader David Cameron was poised to become the new British prime minister. But he would need to govern without a majority after an election marked by fears about how the next government will deal with the country's large deficit.

Germany's DAX finished down 193.17 points, or 3.27 per cent, at 5,715.09, while the CAC-40 in France ended down 122.02 points, or 3.36 per cent,at 3,514.01.

Asian markets closed sharply lower. Tokyo's Nikkei lost 331.10 points, or 3.10 per cent, to 10,364.59, while Hong Kong's Hang Seng tumbled 213.12 points, or 1.06 per cent, to 199,920.29.

Investors around the world are uneasy about the prospect of trouble spreading in the euro zone from Greece's crisis.

Many economists say Greece may be insolvent in the end despite anInternational Monetary Fund-European Unionbailout, and there are fears that other countries will face bond market skepticism and higher borrowing costs that will worsen their finances in a vicious spiral.

"Countries that are in that situation, be it Portugal, be it Spain, be it Italy, are not going to cut their deficits until push comes to shove, and that's part of the problem that it's taking too long for these countries to really cut their deficits and [government debt] risk is going to be the theme of 2010, Ric Palombi, portfolio manager of fixed income at Calgary-based McLean and Partners told CBC News.

"Sovereign risk is going to continue to dog the market for the rest of the year," he said.

Meanwhile, the German parliament on Friday approved Berlin's share of the rescue package for Greece.The lower house of parliament approved, granting as much as $28.6 billion US in credit over three years.

The euro rose 1.1 per cent to $1.2755 US late Friday afternoonin New York from $1.2611 late Thursday.