World markets savaged by US recession fears

Wall Street braced for losses after world stock markets took a beating over fears that the US economy was heading back into recession.Any troubles in the worlds largest economy cast a long shadow over the markets, and a report Friday that the US economy failed to add any new jobs in August caused European and Asian stock markets to sink sharply Monday.The jobs crisis has prompted President Barack Obama to schedule a major speech Thursday night to propose steps to stimulate hiring.Until then, however, traders coming back from the US holiday weekend will have little to hold onto. The uncertainty has already pushed many to pull out of any risky investments such as stocks, particularly financial ones, the euro and emerging market currencies and pile into safe havens: US Treasuries, the dollar, the Japanese yen and gold.With Wall Street closed, investors focused their selling drive in Asia and Europe, where the equity losses Monday were some of the heaviest this year.Dow futures were down 1.8 percent at 11,010 points while the broader S&P 500 futures were 2.0 lower at 1,145.70.The health of the US economy is crucial for the wider world because consumer spending there accounts for a fifth of global economic activity. The US imports huge amounts from Japan and China and is closely linked at all levels with the European market. Beyond its lack of jobs growth, the US has seen a slump in consumer and business sentiments.Traders were hoping for signs that the Federal Reserve might 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.After Asian indexes closed lower, with the Japans Nikkei 225 shedding 1.9 percent, European shares booked sharp losses. Britains FTSE 100 closed the day down 3.6 percent to 5,102.58. Germanys DAX slumped a massive 5.3 percent to 5,246.18, and Frances CAC-40 tumbled 4.7 percent to 2,999.54.Banking stocks were among the hardest hit, partly because the US government on Friday sued 17 financial firms for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.Renewed jitters over the eurozone debt crisis also contributed to the slump in financial stocks amid concerns the banks would need to raise new capital. Deutsche bank closed down 8.9 percent in Frankfurt, while Societe Generale in Paris shed 8.6 percent.And the European debt crisis was never far away. An international debt inspectors review of Greeces finances was interrupted Friday amid disagreements over the countrys deficit figures. The review will resume in 10 days and must be completed in order for Greece to receive bailout loans at the end of the month.Investors were also shaken by signs that the Italian governments commitment to its austerity program is wavering. Prime Minister Silvio Berlusconis government has backtracked on some deficit-cutting measures, prompting EU economic officials to urge Italy to stick to its promised plan.Benchmark oil for October delivery was down $2.12 to $84.33 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 $1.63 at $110.70 on the ICE Futures exchange.