Global financial markets were rocked by more grim economic news yesterday, with US employers axing more than half-a-million jobs in November as the slump gripping the world's biggest economy deepened.
Global financial markets were rocked by more grim economic news yesterday, with US employers axing more than half-a-million jobs in November as the slump gripping the world's biggest economy deepened.
Stock prices tumbled on both sides of the Atlantic as reports of the US job losses - the worst in 34 years - flickered across traders' computer screens. Shares were also hit by news that German manufacturing orders plunged 6.1% in October. The Bundesbank said it sees the German economy - Europe's biggest - shrinking by 0.8% next year. Deutsche Bank said it could contract by up to 4%.
New York stocks quickly retreated, with the Dow Jones industrial average shedding more than 125 points soon after the opening bell. However, the Dow, which lost more than 200 points in the previous session on expectations that the jobs report was going to be dismal, staged a late rally to close 260 points higher - the weak reading on employment ultimately was no surprise to a market growing accustomed to bad news.
In Europe, the London Stock Exchange's FTSE-100 benchmark index closed 114.24 points weaker at 4049.37. Traders said £27.2bn was wiped off leading shares.
Miners and oil stocks took the brunt of the latest sell-off after the economic gloom caused a further slump in commodity prices.
The French CAC-40 index ended the day 173.15 points lower at 2988.01, while Germany's DAX closed 182.76 points off at 4381.47.
Elsewhere on the markets, crude oil fell below $42 a barrel and the pound drifted lower against the dollar and the euro.
Earlier in Washington, the US Labour Department said non-farm payrolls plunged by 533,000 last month, the biggest loss since December 1974, after shrinking a revised 320,000 in the previous month. The jobless rate rose to 6.7%, the highest level since 1993.
Wall Street analysts said it is only the fourth time in the past 58 years that payrolls have fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost.
The employment report was much worse than had been expected. Economists forecast job losses of around 350,000 in November.
They said payrolls are likely to keep sliding into next year as the collapse of the credit market and slump in consumer spending inflict damage on a wide range of companies. Top managers at General Motors said on Thursday the company could collapse before the end of the year, making even more workers unemployed, unless the government provides millions of dollars in financial assistance. President George W Bush, concerned about the viability of US car companies, said last night that some may not survive.
"The labour market capsized in November," said Ryan Sweet, a senior economist at Moody's Economy.com. "The financial panic has hammered the economy and we are seeing a very broad-based decline in payrolls."
"This is almost indescribably terrible," said Ian Shepherdson, chief US economist for High Frequency Economics, in a research note. "The pace of job losses is accelerating alarmingly."
Factory payrolls fell 85,000 after decreasing 104,000 in October. The return of 27,000 striking machinists at the Boeing aircraft company last month helped limit the drop.
Economists had forecast a drop of 100,000 manufacturing jobs. The decrease included a loss of 13,100 jobs in car manufacturing and parts industries.
The Labour Department report also reflected the impact on the economy of the housing slump and the worst credit crisis in seven decades. Payrolls at builders dropped 82,000. Financial firms decreased payrolls by 32,000, after a loss of 31,000 jobs the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 370,000 workers after declining 153,000 in the previous month. Professional and business services, a category that includes temporary workers, eliminated 136,000 jobs. Retail payrolls decreased by 91,300 after a drop of 62,200.
Education and health services industries added 52,000 jobs, and government payrolls increased by 7000.
The employment report, the second issued since Barack Obama was elected president on November 4, is likely to pile pressure on policy advisers to craft additional stimulus measures. Obama named a team that includes New York Federal Reserve Bank president Timothy Geithner as Treasury Secretary-designate and former Federal Reserve chairman Paul Volcker as head of a new White House panel aimed at rebuilding the crumbling economy.
Adding to the general gloom in the markets was a report from the Mortgage Bankers Association that said the percentage of US mortgage holders who were behind in their payments soared to a record 6.99% of loans outstanding in the third quarter and foreclosures were also at new highs.
Economists said this provided further evidence that the US housing slump shows no signs of abating.
