European stocks close lower again

European stock markets closed lower yesterday as much worse-than-expected US job losses added to growing fears the US economic recovery is stumbling badly, dealers said.

The US economy shed 131,000 jobs in July as private sector gains of 71,000 were offset by a government layoff of 143,000 temporary census-takers, with analysts warning that the labour market may take years to get back on its feet.

Revisions to June figures added to the concerns, with job losses now put at 221,000 for the month rather than the 125,000 previously reported.

The markets had been expecting headline job losses in July of 87,000.

Dealers said that continued strong second quarter results were not enough to bolster markets sitting on substantial gains which now looked vulnerable.

In London, the FTSE 100 index of leading shares lost 0.62 per cent to 5,332.39 points. In Paris, the CAC 40 was down 1.28 per cent at 3,716.05 points and in Frankfurt the DAX shed 1.17 per cent to 6,259.63 points.

Elsewhere in Europe, Amsterdam, Brussels fell 1.43 per cent, Madrid lost 1.74 per cent, Milan shed 1.03 per cent and Swiss stocks finished down 0.84 per cent.

In New York, the blue-chip Dow Jones Industrial Average was down 1.14 per cent at around 1600 GMT with the tech-rich Nasdaq Composite down 1.22 per cent.

In Asian trade earlier yesterday, Tokyo slipped 0.12 per cent, Hong Kong gained 0.59 per cent, helped by a strong advance in Shanghai, up 1.44 per cent. Sydney was flat.

Dealers said the US outlook was turning increasingly gloomy, with many expecting the US Federal Reserve to have to ease already very loose monetary policy even further to try and keep the economy on track.

However, with the authorities having spent hundreds of billions on various stimulus measures and with interest rates at record lows, the fear is that the Fed has very few options left and they could come with a high price later.

“The central bank’s problem now is that any additional monetary stimulus will require unconventional methods and the cost and benefit trade-off of these are unclear,” said Ryan Sweet of Moody’s Economy.com.

The White House put the best gloss on the figures, with President Barack Obama’s top economic adviser saying there was no worry the economy would fall back into recession.

Analysts were not so sure – without jobs, the economy goes nowhere.

“The current pace of employment is too slow to replace the more than eight million jobs lost in the recession – not in the next year or two, perhaps even not in the next five years,” said Bart van Ark, chief economist of The Conference Board, a business research firm.

“It’s unlikely that industries such as construction and manufacturing will ever return to pre-recession employment levels,” he added.

For Global Equities analysts in Paris, the figures “were not good news for household confidence or consumer spending and are going to increase worries over the pace of the recovery.”