Wall Street is clamouring for a Federal Reserve rate cut after data showed the US economy lost jobs last month for the first time since 2003.
The pronounced weakness in US non-farm payrolls data, released on Friday by the US Department of Labor, has shocked markets, and rumours abound that Fed might move to cut interest rates as soon as Friday afternoon.
As of 13:30 GMT, the FTSE was down 1.1 per cent , The DAX 1.9 per cent and the CAC 1.9 per cent. The FTSEurofirst index of the top 300 European shares had fallen 1.6 per cent.
And the dollar tumbled to a 15-year low, according to the latest figures from the dollar index, which measures the greenback against a basket of other foreign currencies.
Forecasts had predicted an extra 110,000 jobs would be added to non-farm payrolls in the US this month, but instead, 4,000 were lost. In addition, figures from previous months were revised. The US Department of Labor also said 81,000 fewer jobs were created in June and July than previously thought.
But the figures only cover the week of August 12. According to Bloomberg, that suggests they don’t even reflect the full extent of the crisis.
At the annual Jackson Hole symposium last week, Fed Chairman Ben Bernanke told delegates that the Fed:
…continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets
Mr Bernanke also insisted that the Fed would “pay particularly close attention to the timeliest indicators” since the macro economic data available at the time hadn’t captured the full force of the credit crisis. That has fuelled speculation that the Fed will act to cut rates Friday afternoon rather than wait until its scheduled September 18 meeting.
The S&P 500, which has only just opened has already fallen 1.17 per cent.