US stocks tumbled after a larger than expected slide in June non-farm payrolls signaled that hopes for a quick economic recovery may prove premature.

The Dow Jones industrial average dropped 223.32 points, or 2.6 percent, to close at 8,280.74. The Standard & Poor's 500 Index fell 26.87 points, or 2.9 percent, to close at 896.46. The Nasdaq Composite Index lost 49.20 points, or 2.7 percent, to close at 1,796.52.

European shares extend losses in afternoon session after US non-farm payrolls data showed employers cut more jobs than expected.

The FTSEurofirst 300 index of top European shares is down 1.7 percent at 851.24 points after hitting a session low of 850.28.

US employers cut 467,000 jobs in June, far more than expected, while the unemployment rate rose to 9.5 percent, the government said in a report that showed a labour market continuing to struggle with a deep recession.

Japan's Nikkei average fell 0.6 percent, dented by a fall in blue-chip shares as caution set in ahead of US jobs data, but Hitachi jumped on a report it will boost production of lithium ion batteries for hybrid cars.

Market analysts said the Nikkei was due for a pause after recovering some 40 percent from its March lows, though the mood remained upbeat, reinforced by reassuring manufacturing data from Europe, China and the United States.