US and European stock markets fall on weak US jobs data

Stock markets have fallen sharply as weak US jobs data added to fears of a new global economic downturn.

Wall Street was hit hard, with the Dow Jones, S&P 500, and Nasdaq indexes down more than 2%.

Earlier, European stocks closed lower as the Department of Labor said the US economy added no net jobs in August.

The jobs data follows manufacturing sector surveys released on Thursday which showed activity at factories worldwide dropped last month.

London's FTSE 100 ended 2.3% down, and Frankfurt's Dax was 3.36% lower. In France and Spain, markets were more than 3% down, and Milan's exchange sank almost 4%.

The Dow dropped 2.2%, and the S&P and Nasdaq were 2.5% down.

The London market was not helped by other data on Friday that pointed to a further slowdown in the construction sector in the UK.

The slump began in late trading in the US on Thursday, where the Dow Jones ended the day 1% lower, before continuing in Asia on Friday morning, where Tokyo's Nikkei fell 1.2%, and Hong Kong's Hang Seng 1.8%.

Banks across Europe were among the worst performers.

In the UK, Barclays fell 8.4% and Lloyds 7.1%. In Germany, Deutsche Bank and Commerzbank were down 6% and 5.5% respectively. In France, Credit Agricole fell 7.4% and Societe Generale was off 6.6%.

In the US, where it has emerged that the banks will be sued by a US government home loans agency, shares in Bank of America were hammered, dropping 8% at the open, while Citibank fell 5.2%.

Seeking safety

The latest falls follow a highly volatile August, with markets globally rocked by a slew of weak economic data from the US and Europe.

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Last Updated at 02 Sep 2011, 19:58 GMT

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There were also fears over the impact of government austerity programmes, and concern at the implications of the downgrade of some governments' credit ratings, including that of the US.

Haven investments rallied as investors sought safety from the downturn.

Gold rose 3% for the day to just below $1,880 a troy ounce, close to the all-time high of $1,913.50 set last month.

The euro fell 3% against the Swiss franc, briefly touching 1.10 francs after the US jobs data release.

The Swiss authorities have repeatedly intervened to weaken their currency after the euro dropped below the 1.05 francs level last month.

US government debt also rallied, with the yield - the implied cost of borrowing - of the 10-year Treasury bond falling instantly from 2.13% to 2.03%, in anticipation of a possible further round of debt purchases by the Federal Reserve.

The 10-year yield briefly dropped below 2% early in August, hitting its lowest level since World War