European sovereign default risk rose to a record after a reportshowed employment in the U.S. unexpectedly stagnated in August,adding to signs the global economic recovery is weakening.

The Markit iTraxx SovX Western Europe Index of credit- defaultswaps insuring the debt of 15 governments rose 11 basis points to310 at 1:40 p.m. in London, surpassing an all-time high closingprice of 308 on Aug. 26. Swaps tied to Italian debt jumped 12 basispoints to 397, topping last month's record closing price of 391,according to CMA.

Payrolls were unchanged last month, the weakest reading sinceSeptember 2010, after an 85,000 gain in July that was less thaninitially estimated, Labor Department data showed today inWashington. The median forecast in a Bloomberg News survey calledfor a rise of 65,000.

“Payrolls are always a roll of the dice,” Roger Francis, ananalyst at Mizuho International Plc in London, said before thereport. “The economy is still growing, but not at a pace thatdelivers upside for jobs.”

Italy's 10-year bonds dropped for a 10th straight day, thelongest run of declines since the euro's 1999 debut. The differencein yield between Italian securities and benchmark German bundswidened to as much as 325 basis points, while the spread forSpanish notes increased to 307 basis points, both the widest sincethe European Central Bank started buying the nations' debt on Aug.8.

Spain, Ireland

Credit swaps on Spain rose 12 basis points to 386, whilecontracts on Ireland climbed 15 basis points to 792, CMA pricesshow.

Corporate credit in Europe was also hurt, with the Markit iTraxxCrossover Index of default swaps on 40 companies with mostlyhigh-yield credit ratings rising 33 basis points to 687, accordingto JPMorgan Chase & Co. The Markit iTraxx Financial Indexlinked to the senior debt of 25 banks and insurers climbed 11 basispoints to 246, signaling investors are less optimistic about creditquality.

A basis point on a credit-default swap protecting 10 millioneuros ($14.2 million) of debt from default for five years isequivalent to 1,000 euros a year. Swaps pay the buyer face value inexchange for the underlying securities or the cash equivalentshould a borrower fail to adhere to its debt agreements.

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