Stock markets retreated Thursday as a hotter-than-expected US jobs report raised concerns that the Federal Reserve would keep interest rates higher for longer.

Wall Street fell at the open after official data showed the world's biggest economy added 272,000 jobs last month, up from 165,000 in April and the highest level since December.

"The payrolls figure was a shock to the market," said Kathleen Brooks, research director at trading platform XTB.

The US central bank has held rates at a 23-year high in recent months in hopes of easing demand to rein in inflation sustainably.

With the economy still adding more jobs than anticipated, analysts expect the Fed to hold off rate cuts for a while longer.

Brooks said the US jobs report lowered the chance of a September rate cut by the Fed to 50 percent from 60 percent previously, and only one reduction is expected this year.

"The May jobs report is sort of a mixed bag for investors," said Bret Kenwell, US investment analyst at the eToro trading platform.

"On the one hand, it calms some worries that the US is hurling toward some sort of economic cliff, as we have seen soft economic data over the last month," he said.

"On the other hand, this report likely pushes back expectations of a Fed rate cut, even as we're seeing other G7 central banks cutting rates."

The Canadian central bank became the first among peers in the Group of Seven to cut rates on Wednesday, and the European Central Bank followed suit on Thursday, reducing rates for the first time since 2019.

But the ECB said the path for future cuts was uncertain as inflation could remain above its two-percent target well into next year.

Europe's main stock markets also slid on Friday.

All eyes will now turn to the Fed's monetary policy meeting next Tuesday and Wednesday.

While the Fed is not expected to make a decision on rates, investors will watch for any signal about its "dot plot", or roadmap, for interest rates.

Its previous guidance in March was for three cuts this year, but many are preparing for that to be whittled down in light of recent economic data.

"We believe that equities will struggle into next week's" Fed meeting, Brooks said.

- Key figures around 1350 GMT -

  • New York - Dow Jones: DOWN 0.1 percent at 38,834.63 points
  • New York - S&P 500: DOWN 0.1 percent at 5,348.83
  • New York - Nasdaq: DOWN 0.1 percent at 17,149.34
  • London - FTSE 100: DOWN 0.3 percent at 8,263.18
  • Paris - CAC 40: DOWN 0.5 percent at 7,996.65
  • Frankfurt - DAX: DOWN 0.6 percent at 18,543.28
  • EURO STOXX 50: DOWN 0.3 percent at 5,053.17
  • Tokyo - Nikkei 225: DOWN 0.1 percent at 38,683.93 (close)
  • Hong Kong - Hang Seng Index: DOWN 0.6 percent at 18,366.95 (close)
  • Shanghai - Composite: UP 0.1 percent at 3,051.28 (close)
  • Euro/dollar: DOWN at $1.0820 from $1.0896 on Thursday
  • Pound/dollar: DOWN at $1.2720 from $1.2794
  • Dollar/yen: UP at 156.95 yen from 155.59 yen
  • Euro/pound: DOWN at 85.06 from 85.14 pence
  • Brent North Sea Crude: FLAT at $79.84 per barrel
  • West Texas Intermediate: UP 0.2 percent at $75.67 per barrel