By Pranav Kashyap and Shashwat Chauhan

(Reuters) -Europe’s STOXX 600 fell close to 3% on Friday as global equity markets ran into turbulence after a U.S. jobs report exacerbated worries of an economic slowdown in the world’s biggest economy, with financials and tech the worst hit.

The pan-European STOXX 600 index dropped 2.7% to 497.85 points, hitting an over three-month low.

Most European sub-indexes traded lower, with the technology sector falling 6.1%, its biggest one-day decline since October 2020, tracking a sell-off on Wall Street. [.N]

Global equity markets were rattled after data showed the U.S. unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labor market was deteriorating and potentially making the economy vulnerable to a recession.

“This was a bad news report for the market and will continue the growth scare that has been roiling equities lately,” said Lara Castleton, U.S. head of portfolio construction and strategy (PCS) at Janus Henderson Investors.

“Equities selling off should be seen as a normal reaction, especially considering the high valuations in many pockets of the market. It’s a good reminder for investors to focus on the earnings of companies going forward.”

A STOXX fear gauge hit an over one-year high of 24.52 points.

The financial sector lost 5.2%, while banks shed 4.3%, extending declines from the previous session when the sector was hit by downbeat earnings and prospects of global monetary policy easing.

Lower rates could weigh on interest margins, a key source of income for lenders.

Global equity markets were hit hard in the previous session following a dismal reading in U.S. manufacturing activity on Thursday, which plunged to an eight-month low in July, dampening hopes of a soft landing for the economy.

A handful of defensive stocks, companies which tend to provide consistent dividends and stable earnings regardless of the state of the overall stock market, were the rare winners.

Individual heavyweights such as consumer staples majors Unilever and Nestle and healthcare firms AstraZeneca and Sanofi gained between 0.3% and 1.3%.

Among other movers, Dutch specialty chemicals maker IMCD added 6.7% after beating estimates on second-quarter EBITA.

French insurer AXA was up 1.4% after BNP Paribas said it is in exclusive talks with the company to acquire its AXA Investment Managers arm for 5.1 billion euros ($5.50 billion).

Meanwhile, Switzerland’s annual inflation rate held steady at 1.3% in July, in line with analysts’ expectations, encouraging bets that the central bank could lower borrowing costs again next month.

(Reporting by Pranav Kashyap and Shashwat Chauhan in Bengaluru; Editing by Janane Venkatraman, Sonia Cheema and Sharon Singleton)