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Wall Street slumps nearly 2% in early trading on jobs disappointment

The idea that poor US non-farm payroll numbers may not spook the markets too much because it would mean further quantitative easing from the Federal Reserve seems to have been blown out of the water.

In early trading the Dow Jones Industrial Average has lost more than 240 points, in the wake of news that the US created zero jobs last month, compared to expectations of an increase of up to 75,000. The FTSE 100 is currently 146.04 points lower at 5272.61.

With the – inappropriately named? – Labor Day holiday coming up on Monday, the rest of this trading session could be equally volatile as investors try to square their positions ahead of the break.

Gold is up almost an ounce at 72, thanks to its supposed safe haven status, so it’s no surprise that virtually the only riser in the FTSE 100 is Randgold Resources, 260p better at £66.55.

As for the US figures themselves, they include some 45,000 Verizon workers who were out on strike, but even so they are worse than forecasts and could well prompt a new round of QE from the Fed. Its next meeting at the end of this month has been extended to a two day event already, but some believe Bernanke may not be allowed to wait until then. Scott Corfe, an economist at the Centre for Economics and Business Research, said:

Today’s release makes for pretty grim reading, with next to nothing in the way of good news about the US labour market. President Obama, commenting on the job market a few weeks ago, said he wanted “to be judged in a year from now on whether or not things have continued to get better”. If today’s figures are an indicator of bad things ahead, he could come to regret saying this ahead of next year’s election.

With respect to monetary policy, the underlying data now suggest that QE3 will be hard to stave off. Bernanke cannot afford to wait until the next Federal Reserve meeting on September 20 before making an announcement on the parlous economic situation. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds