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World stock markets tumble after dour US employment numbers revive fears of recession
BANGKOK (AP) ' World stock markets took a beating Monday after U.S. companies stopped hiring in August, reviving fears that the world's largest economy is heading back into recession.
Oil prices extended losses to below $86 a barrel as the dismal jobs data released Friday suggested that a weak U.S. economy will lessen demand for crude. The dollar was higher against the euro and steady against the yen.
European shares sharply declined in early trading. Britain's FTSE 100 dropped 1.6 percent to 5,206.56. Germany's DAX fell 2.7 percent to 5,391.24 and France's CAC-40 toppled 2.4 percent to 3,074.47. Markets in the U.S. are closed for the Labor Day holiday.
Earlier in Asia, Japan's Nikkei 225 stock average sank 1.9 percent to close at 8,784.46 with sentiment also undermined by the persistent strength of the yen, which hurts exporters.
Australia's S&P/ASX 200 fell 2.4 percent to 4,141.9 and South Korea's Kospi slid 4.4 percent to 1,785.83. Hong Kong's Hang Seng slid 3 percent to 19,616.4. Benchmarks in Singapore, Taiwan, New Zealand and the Philippines were also down.
Investors were sticking to the sidelines as expectations mounted that the U.S. Federal Reserve would take action at its September meeting to support the economy ' perhaps a third round of bond purchases, dubbed quantitative easing III or QE3, analysts said.
"Right now the possibility has increased," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "I think they have to do something. The markets are expecting QE3."
Mainland Chinese investors worried about the economic outlook dumped shares, dragging Shanghai's benchmark Composite Index down 2 percent to 2,478.74, its lowest close in 13 months. The Shenzhen Composite Index lost 2.4 percent to 1,097.07.
Shares in cement, coal miners, furniture makers and engineering companies led the decline.
"Slower growth prospects and the weakness in international markets were behind today's losses," said Cai Dagui, an analyst at Ping'an Securities, based in Shenzhen.
"Since the market is being driven more by the economy itself and policies, rather than the liquidity situation, it could still edge lower, though the room for losses is limited," he said.
The Dow Jones industrial average closed 2.2 percent lower Friday, wiping out its gain for the week, on the heels of the Labor Department reported that no jobs were added in the U.S. in August. It was the worst employment report in 11 months and renewed fears that another recession could be on the way.
The lack of hiring in the U.S. last month surprised investors. Economists were expecting 93,000 jobs to be added. Previously reported hiring figures for June and July were revised lower. The average work week declined and hourly earnings fell. The unemployment rate held steady at 9.1 percent. The rate has been above 9 percent in all but two months since May 2009.
The jobs crisis has led President Barack Obama to schedule a major speech Thursday night to propose steps to stimulate hiring.
The Dow Jones industrial average lost 253.31 points to close at 11,240.26. It was the biggest fall in two weeks. The Standard & Poor's 500 index fell 2.5 percent to 1,173.97. The Nasdaq composite fell 2.6 percent to 2,480.33.
The sour jobs report came on top of Europe's debt problems, which are still dragging on. Meanwhile, China's economy is showing signs of slower growth.
Investors seeking a relatively stable store of value during times of economic turbulence in financial markets have been scooping up gold, sending its price up 50 percent over the past year.
In currencies, the euro weakened to $1.4158 from $1.4187 in New York late Friday. The dollar was unchanged at 76.72 yen. Last month, the dollar fell under 76 yen, which was a new post-World War II high for the Japanese currency.
Benchmark oil for October delivery was down 65 cents to $85.80 a barrel in electronic trading on the New York Mercantile Exchange. Crude fell $2.48 to settle at $86.45 on Friday.
In London, Brent crude for October delivery was down 30 cents at $112.33 on the ICE Futures exchange.
AP researcher Fu Ting contributed from Shanghai.