Stocks fall, Bonds rise as US Jobs Data show weak numbers

Global stocks fell Friday to a two-year low while bonds went up as the bleak US employment report send signals the world economy is sliding deeply into crisis.

U.S. Job Loss Worse than Expected

Unemployment in the United States rose to 6.1 percent in August, the highest ever recorded in more than 4 years, while 84,000 job cuts were reported, worse than what every economist was expecting.  

A movement at the interest rates futures indicates the Federal Reserve might cut rates anytime late this year.  Wall Street suffered its steepest fall in more than two months as it opened Thursday as the stocks futures of US continue to stay solidly in the red.

Gary Thayer of Wachovia Securities said the figures are clear indications that the economy is still on wavy waters pushing investors to seek refuge for their money on safer havens.

Global Economies Continue to Slide

Global economic slide is currently the trend today giving the Fed no reason to focus on inflation but instead train its efforts on salvaging the economy to get it on its feet.

The FTSE 300 index tumbled by 1.8 percent.  Similar shake downs at an even steeper decline were felt at the Asian stock markets.

The MCSI global equity index fell by 1 percent following a lowest decline experienced in July 2006.  The index has already lost 5.6 percent since the month started after 6 consecutive losing sessions.

Stocks of commercial banks suffered after the European Central Bank tightened the screws on the rules.  Specifically it tightened rules on the assets that can be submitted by banks as collateral.  The changed rules were brought about by worries that the regulations of ECB have been subjected to misuse.

The ECB will likely increase the margin on assets valuation to 12 percent applicable on all asset backed securities.   Banking analysts said that the changed rules on ABS would discourage its use as collaterals, making it more expensive to borrow funds from the central bank.

Euro Zone Heading for Recession

European currencies continue to fall back as economies outside of the United States continue to deteriorate also.  Europe, specifically, is faced by deep crisis and a recession is feared.  The decline of the German industrial output by 1.8 percent strengthened beliefs that global economy is sliding deeper.

The Commerzbank noted that the downward trend experienced by the German economy have no solution yet.  Weak business sentiment and the decline in industrial orders will push the German production output to fall continually.   The decline of foreign orders and demands and the end of domestic boom will worsen the German situation.

The Euro fell to an 11-month low at $1.42 while the British Sterling skidded to a 12-year low on weighted trading.