Stock markets and euro jitter on double-dip fears
World stock markets have been hit by renewed fears of a double-dip recession.
After a volatile day's trading, the FTSE 100 closed down 1.1%, France's Cac 40 ended 1.2% lower. In Germany, where the cabinet agreed a major austerity plan, the Dax closed 0.6% down.
The euro dropped to its lowest level against the dollar in four years.
Markets in Asia had earlier suffered sharp falls after Friday's disappointing jobs numbers in the US.
On Friday, the US Labor Department reported that some 431,000 jobs were created in May. However, analysts had expected 500,000 new jobs.
Analysts said these were partly to blame for further drops on US markets in Monday trading.
German industrial surge
European markets followed Asian markets lower in early trading. However, strong German April manufacturing data sparked a temporary bounce back in late morning trading.
The rise came after Germany reported a 2.8% increase in industrial orders in April - considerably higher than market expectations.
Industrial orders had already risen 5.1% in March, reflecting the extent to which Europe's largest economy has benefited from the global recovery and the weakening euro.
During the 2008 financial crisis, factory orders fell 38%. Even after April's surge, they remain 17% below the pre-crisis peak.
'Very very jittery'
In Asia, Japan's Nikkei 225 index closed down 3.8%, its biggest one-day fall in over a year.
The index had been down as much as 4% at one point and its closing level marked its biggest daily fall in 14 months.
Hong Kong's Hang Seng index also closed more than 2% lower.
"The overnight falls show how much the fear of a double-dip recession still exists," said Euan Stirling, investment director at Standard Life, speaking on BBC Radio 4's Today programme.
"The US consumer has for decades been the single most important factor in global growth," he noted.
"So when US unemployment... is worse than expected, the equity markets become very very jittery."
Oil and gas stocks have been particularly badly hit, amid worries that global energy demand may be slowing.
Japanese oil refining company JX Holdings was the biggest faller in Tokyo, down 8.3%.
The price of Brent crude oil dropped 8% late on Friday and over the weekend to $70.50. It continued to recover on Monday, however, ending $72.24 after a strong rally towards the end of the session.
Meanwhile, US light, sweet crude climbed to $71.64.
On currency markets, the euro dropped 2.8% over the weekend to $1.188, before rebounding above $1.196.
The single currency hit an 8-year low against the Japanese yen of just over 108 yen, before recovering to nearly 110 yen.
As well as US job woes, market angst over the eurozone was piqued further on Friday afternoon.
In Hungary, a spokesman for the new prime minister claimed that the country faced a "Greek-style" financial crisis after the outgoing government had allegedly falsified data.
However, the Hungarian government has since been at pains to rephrase the comments after the country's currency, the forint, dropped 6% against the dollar on the news.