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Jobs report eases US market, but EU feeling heat

A better-than-expected US jobs report helped abate selling pressures on Wall Street. But Europe's debt problems are pressuring EU officials to act.

By Ben Deighton and Andreas FramkeReuters / August 5, 2011

Traders work on the floor of the New York Stock Exchange on Aug. 5, 2011, in New York. A US jobs report that hiring improved in July sent stocks sharply higher just after the market opened. The rally lasted less than a half-hour as investors continued to worry about a possible recession and Europe's debt problems. European Union officials are under increasing pressure to act before the interest costs of some of the weaker EU nations spiral out of control.

Jin Lee/AP



European leaders came under heavy pressure on Friday to take decisive action to stem a spiralling debt crisis while a robust U.S. jobs report brought some relief to battered world markets.

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Fears of U.S. recession and the spreading euro zone crisis has wiped $2.5 trillion off world stocks this week.

Better than expected U.S. jobs growth in July helped Wall Street open higher, gaining back at least some of the previous session's sharp losses, but the Dow Jones Industrial Average soon subsided to stand flat on the day.

The leaders of Germany, France and Spain scheduled crisis talks later in the day after China and Japancalled for global policy cooperation to stop panic on the markets.

Discord among EU policymakers over how to stop a disastrous spread of the crisis to Italy and Spainhas caused increasing frustration among investors who have also been spooked by fears that the United States could slip into recession.

Most notably, the European Central Bank disappointed markets by buying Irish and Portuguese bonds but not government paper in Italy and Spain where bond yields have blown out this week on fears that they may need bailing out.

"Would the ECB please get serious," Berenberg private bank said in a note reflecting global concern. "We need a circuit breaker to stop the vicious circle in which fear feeds on fear."

The ECB is holding back help for Italy and Spain, the euro zone's third and fourth biggest economies, to force them to toughen austerity measures, including bringing them forward.

Italy's austerity package has been criticised for back loading the most important measures until after an election scheduled for 2013, clearly for political reasons.

The call for coordinated action from China and Japan was echoed by European Economic and Monetary Affairs Commissioner Olli Rehn.

"International policy coordination through the G7 and G20 is of critical importance," he told a news conference, having broken off his vacation and returned to Brussels.

"Some of the reasons for these tensions relate to developments outside the euro area. Investor sentiment has been negatively affected by the impact of the debt ceiling negotiation in the United Statesand by recent data suggesting a softer patch in the global economy."

ECB executive board member Jose Manuel Gonzalez-Paramo joined the chorus calling for urgent and decisive action, although he said there was no need for panic.

French President Nicolas Sarkozy was to discuss the situation with German Chancellor Angela Merkeland Spanish Prime Minister Jose Luis Rodriguez Zapatero in separate telephone calls on Friday evening, his office said.


The ECB reactivated its dormant bond-buying programme on Thursday in an attempt to hose down the euro zone's deepening sovereign debt crisis, but only bought Portuguese and Irish debt. Influential members of the ECB opposed even that.

Central bank sources told Reuters that four out of 23 ECB governing council members, including powerful German Bundesbank chief Jens Weidmann, voted against the decision to resume any bond purchases.