Stock markets fell yesterday as weak US jobs data showed that no net jobs were added last month, fuelling fears of a renewed economic slowdown. Shares immediately fell a further 1 per cent, adding to losses earlier in the day.
London's FTSE 100 ended down 2.3 per cent on the day, while Frankfurt's Dax closed 3.4 per cent lower.
Nonfarm payrolls were unchanged, the US labour department said yesterday. Economists had expected a gain of 75,000 jobs. The report underscored the frailty of the economy and kept alive fears of a recession.
"The economy is slowly grinding to a halt. The problem, however, on the policy side is that I wonder whether the numbers are truly weak enough to galvanise a political response," Steve Blitz, a senior economist at ITG in New York, told Reuters.
US stock index futures extended losses on the data, while Treasury debt prices rose. The dollar extended losses against the Swiss franc but rose against the euro.
Adding to the depressing nature of the report, nonfarm employment for June and July was revised to show 58,000 fewer jobs.
Despite the lack of employment growth, the jobless rate held steady at 9.1 per cent. The jobs data follows manufacturing sector surveys released on Thursday that showed activity at factories worldwide dropped last month.
Bank stocks were among the worst hit. In the UK, Lloyds fell 4.7 per cent and Barclays 5.6 per cent. Germany's Commerzbank fell by 5 per cent, Deutsche Bank by 5.4 per cent and France's Société Générale by 5.1 per cent.
Stock market falls followed a volatile August, with markets globally rocked by weak economic data from the US and Europe.
There were also fears over the effect of government austerity programmes, and concern at the implications of the downgrade of some governments' credit ratings, including that of the US.
Gold recovered some ground after falling last week, rising 3 per cent yesterday to just below US$1,880 a troy ounce, close to the all-time high of $1,913.50 set last month.
The euro fell 3 per cent against the Swiss franc, briefly touching 1.10 francs after the US jobs data release.
* With agencies