Markets hit as US employment data raise recession fears

Stock markets sank yesterday. MarketWatch reports:

U.S. stocks on Friday sank for a third time this week, with the Nasdaq Composite Index hit with its steepest drop since Feb. 27, 2007, after a jump in unemployment spelled a likely recession for investors...

The Dow Jones Industrial Average fell 256.5 points, or 2%, to 12,800.2, with 29 of the blue-chip index's 30 components finishing in the red, giving the Dow a weekly fall of 4.3%...

Broader equities indexes declined as well, with the S&P 500 Index dropping 35.53 points, or 2.5%, to 1,411.63, translating into a 4.5% decline from a week ago.

Down for a sixth consecutive session, the Nasdaq was slammed the hardest, shedding 98.03 points, or 3.8%, to 2,504.65, with the tech-heavy index falling to lows not seen since the end of August.

Many other stock markets outside the US also plunged yesterday.

In Europe, stocks turned sharply lower after the U.S. jobs data, with the automotive sector under particular pressures.

In Asia, Japanese stocks were hard hit as Nissan Motors and other exporters took heavy losses amid worries about the health of the U.S. economy.

Stocks weren't the only ones to lose ground.

After rising to a record intraday high of $100.09 a barrel on Thursday, crude pulled lower as worries about the economy sparked thoughts of reduced demand.

Oil futures ended $1.27 at $97.91 a barrel on the New York Mercantile Exchange.

And the news that sparked it all:

Ahead of Wall Street's opening bell, the Labor Department reported U.S. seasonally adjusted nonfarm payrolls climbed by 18,000 in December, the weakest growth since August 2003. Read more.

Stocks retained their losses after the Institute for Supply Management reported its nonmanufacturing index fell to 53.9 in December from 54.1 in November. Read Economic Report.

Meanwhile, apart from the prospects of slower growth, Europe also has other worries. From Bloomberg yesterday:

The inflation rate in the euro area was 3.1 percent, unchanged from November and the highest since May 2001, the European Union's statistics office in Luxembourg said today. The rate has never been higher since the launch of the euro in 1999...

While some of the ECB's Governing Council members wanted to increase borrowing costs last month to curb inflation, according to ECB President Jean-Claude Trichet, slowing economic growth is restraining their capacity to raise interest rates. Europe's service industries grew at the slowest pace in two and a half years in December, and French consumer confidence unexpectedly dropped to a 19-month low.