World stocks tumble on US jobless fears

LONDON (AP) – US and European stock markets fell sharply Wednesday amid fresh worries about the US labor market following a grim jobs survey and the announcement aluminum producer Alcoa will slash jobs.

The FTSE 100 index of leading British shares closed down 131.41 points, or 2.8 percent, at 4,507.51, while Germany’s DAX fell 88.84 points, or 1.8 percent, to 4,937.47. France’s CAC-40 was 50.13 points, or 1.5 percent, lower at 3,346.09.

The Dow Jones industrial average slid 152.29 points, or 1.7 percent, to 8,862.81, while the broader Standards & Poor’s 500 index fell 17.25 points, or 1.9 percent, to 917.45.

The sell-off was triggered by a report by payrolls firm ADP into the US jobs market, which fueled worries that Friday’s official non-farm payrolls data for December will be worse than even the gloomiest of predictions.

ADP reported that private employers in the US shed some 693,000 jobs in December, following a downwardly-revised 476,000 drop in November – meaning that the US economy has shed well over one million jobs in just two months, according to ADP. The figures were subject, however, to widespread methodological changes in the hope that they will improve the tracking of the Department of Labor’s official non-farm payrolls report.

“People are concerned with the employment report coming out on Friday,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.

“The market has shrugged off some bad news recently, and it’s starting to get to the point where it can’t do that anymore,” he added.

The deteriorating jobs picture in the US was illustrated by Alcoa Inc.’s announcement late Tuesday that it is reducing its global work force by about 13,500, or 13 percent, by the end of the year and lowering total output by more than 18 percent annually.

Stock markets had started the New Year in sprightly mood on relief that 2008 has been left behind and amid hopes that the incoming Obama administration will unveil a near $800-million stimulus plan that may help limit the depth and breadth of the US recession.

However, as Wednesday’s stock losses showed, investor optimism remained guarded, especially as the coming few months will likely be dominated by even grimmer economic and corporate news.

That was evident in India, where the Sensex index plunged more than 7.3 percent to 9,586.88 after Satyam Computer Services Ltd.’s chairman, B. Ramalinga Raju, said in a letter to the board released to the stock exchange that the company’s balance sheet was loaded with “fictitious” assets and “non-existent cash.”