World stocks sag on key US jobs data

LONDON—European stock markets and Wall Street futures fell further Thursday after worse than expected U.S. jobs data fueled renewed concerns about when the world's largest economy might recover from the recession.In Europe, the FTSE 100 index of leading British shares was down 79.71 points, or 1.8 percent, at 4,261 while Germany's DAX fell 127.61 points, or 2.6 percent, to 4,777.83. The CAC-40 in France was 44.57 points lower, or 1.4 percent, at 3,172.43.

The U.S. Labor Department reported that the U.S. economy shed 467,000 jobs in June, nearly 100,000 more than anticipated, and way more than the 322,000 decline in May.

June's rise in the number of job losses brought an end to a run of five straight falls in the pace of payroll declines and dampened expectations that the U.S. economy was poised for a strong recovery soon.

"Our expectation throughout the crisis has been that the U.S. would be the first major developed nation to emerge from recession and that it would experience a stronger bounce back," said Richard Snook, senior economist at the Center for Economic and Business Research in London.

"Today's figures do not change this view -- they merely highlight that the return to growth will not be without setbacks along the way," he said.

Though the headline payrolls number fell by more than anticipated, the unemployment rate did not rise as much as expected even though it did strike a 26-year high of 9.5 percent. Some economists were predicting that the unemployment rate would rise to 9.7 percent.

Still, the greater than expected job losses weighed on markets. European markets, already down ahead to the data, dropped another percentage point as Wall Street futures turned sharply lower.

Losses already expected on Wall Street swelled following the downbeat jobs news. Dow futures were 111 points, or 1.3 percent, lower at 8,337 while the broader Standard & Poor's 500 futures fell 11.90 points, or 1.3 percent, to 907.40.

Jobs data were downbeat in Europe as well, as unemployment in the 16 countries that use the euro spiked to a ten-year high in May, reinforcing concerns that any recovery will take time with so many people out of work. Eurostat, the statistics office of the EU, said the seasonally-adjusted unemployment rate for the euro zone in May was 9.5 percent, up from April's 9.3 percent.

Since unemployment is a lagging indicator, the number of jobless will likely continue to rise for a while even when the recession officially ends. Despite recent hopes that the global economic downturn may be easing, investors are fully aware that high unemployment levels will continue to weigh on consumption and sentiment for many months and years.

As the payrolls news came, European Central Bank president Jean-Claude Trichet was holding his monthly press briefing following the governing council's decision to keep its interest rate unchanged at the record low of 1 percent.

Trichet noted some early signs of economic improvement while maintaining his view that recovery will take time and that the central bank will continue trying to get banks to lend again by massive injections of liquidity.

Stocks around the world managed to achieved one of the best quarters in years during the second quarter -- the S&P 500 index in the U.S., for example, rose around 16 percent during the quarter, its best performance since 1998 -- amid hopes of a recovery around the world despite ongoing worries about the global banking system, public finances and the length and depth of the recession. link....