US woes hit markets across the world

Obama said he had discussed additional steps to help the recovery with his advisers, but the speech did not contain any concrete measures, and stocks, already down, fell further.

Fed chairman Ben Bernanke said last week that another round of monetary easing may be in the offing if the US economy continues to weaken, so investors this week will be focused on a round of top-tier economic data, which culminate on Friday with non-farm payroll figures for August.

The payroll data often set the market tone for a week or two, and anything particularly weak will likely affect whether the Fed decides to introduce additional stimulus measures. At the moment, market consensus is that around 90,000 US jobs were lost in August, but that 26,000 were added, if government census jobs that ended are taken out of the equation. Before then, investors will have plenty of other key economic data to digest, not least the monthly manufacturing and services surveys from the US Institute of Supply Management.

"Markets are bracing for a heavy economic calendar," said Michael Woolfolk, an analyst at Bank of New York Mellon.

Market sentiment was buoyed on Friday after Bernanke indicated the central bank would back further stimulus measures, if the US economy continues to weaken. Figures on the same day showed that the world's largest economy grew at an annualised rate of 1.6 per cent in the second quarter of the year, down from the previous estimate of 2.4 per cent.

The willingness of major central banks to take more action to prevent a slide back into recession has generally reassured equity market investors who have been unnerved over the past couple of months by evidence from the US to China that the global economic recovery is losing momentum.

The Dow Jones industrial average was down 140.70 points, or 1.39 per cent, at 10,009.95 while the broader Standard & Poor's 500 index was down 15.68 points, or 1.47 per cent, at 1,048.91. The Nasdaq Composite index was down 33.66 points, or 1.56 per cent, at 2,119.97.

In Europe, Germany's DAX closed down 38.76 points, or 0.7 per cent, at 5,912.41, while the CAC-40 in France fell 20.43 points, or 0.6 per cent, to 3,487.01. British markets were closed.

The Bank of Japan took action to help prop up an increasingly fragile economy, deciding at an emergency meeting to further ease monetary policy by expanding low-interest loans for financial institutions to 30 trillion ($355 billion) from 20 trillion.

That supported shares in Japan - more liquidity in the markets is generally good for stocks - and the Nikkei 225 stock average closed up 158.20 points, or 1.8 per cent, at 9,149.26.

The BoJ's latest moves did nothing to halt the export-sapping appreciation in the yen, as many currency traders viewed the measures as insufficient and the dollar was down 0.8 per cent at 84.67.

"While it is encouraging that the BoJ seems to be moving in the right direction, the response from the central bank was underwhelming and came as a disappointment," said Eric Viloria, a currency strategist at GAINCapital.com.

Last week's decline in the dollar to a 15-year low of 83.61 proved to be the catalyst to the Bank of Japan's emergency meeting. The worry is that the rising yen will make it more difficult for Japan's high-value exporters to compete in international markets, further threatening country's paltry economic recovery.

While the US and Japanese economic news has generally been disappointing over the past month or two, the eurozone economic data have been better than expected. The European Commission's monthly economic sentiment survey released yesterday sustained hopes that the single currency zone was grappling with its debt crisis much better than the markets had feared earlier this year.

Its economic sentiment indicator rose 0.7 points to 101.8 in August, its highest level since March 2008, with confidence improving in almost all sectors.

Although the figures will likely cheer policymakers, the European Central Bank is not expected to change policy when it meets on Thursday. It is expected to keep its main interest rate unchanged at 1 per cent.

The better than expected data did little to boost the euro, which was trading 0.6 percent lower on the day at $1.2682.

Oil prices slipped, also hit by investor unease about stalled economic recovery and a slightly stronger dollar after oil posted three straight higher settlements to end the week.

US crude for October delivery fell 44 cents, or 0.59 per cent, to $74.73 a barrel while, in London, ICE Brent for October dipped only 6 cents to $76.59 a barrel.

10,009.95 -140.70