US and European stock markets fall on weak US jobs data

Stock markets have dropped sharply as weak US, jobs data added to threats of a new global economic downturn.

Wall Street was most effected, with the Dow Jones, S&P 500, and Nasdaq indexes down more than 2%.

Earlier, European stocks closed down as the Department of Labor said the US economy added no net jobs in August.

The jobs data follows production sector surveys released on Thursday which showed activity at factories worldwide fallen last month.

London's FTSE 100 ended 2.3% drop, and Frankfurt's Dax was 3.36% down. In France and Spain, markets were more than 3% fall, and Milan's exchange sank almost 4%.

The Dow dropped 2.2%, and the S&P and Nasdaq were 2.5% fall.

The London market was not helped by other data on Friday that pointed to a further slowdown in the construction industry in the UK.

The slump start  late trading in the US on Thursday, where the Dow Jones ended the day 1% down, before continuing in Asia on Friday morning, where Tokyo's Nikkei drop index 1.2%, and Hong Kong's Hang Seng drop index 1.8%.

Bank sector in Europe was worst effected.

In the UK, Barclays share drop 8.4% and Lloyds 7.1%. In Germany, Deutsche Bank and Commerzbank were fallen 6% and 5.5% respectively. In France, Credit Agricole dropped 7.4% and Societe Generale was off 6.6%.

In the US, where it has emerged that the banks will be sued by a US government home loans agency, shares in Bank of America were hammered, falling 8% at the open, while Citibank share dr0ped 5.2%.

Portugal plans biggest spending cuts for 50 years

The Portuguese government is planning the country's largest expendeture cuts in 50 years, a move its finance minister described as "unprecedented".

Vitor Gaspar said the centre-right Social Democratic administration would reduce public spending from the current 44.2% of Portugal's annual economic output or GDP to 43.5% by 2015.

The government is planing to meet its budget deficit reduction targets.

These were agreed when Portugal required a bailout in May.

The country is now continuing to get a total 78bn euros ($112bn; £70bn) from the European Union and International Monetary Fund.

Like neighbouring Spain, Portugal has faced a number of public protests against government spending cuts.

Mr Gaspar plans for higher tax rates for the highest-earning companies and individuals.

Italy drops proposed tax on high earners

Italian Prime Minister has said, the Italian government has dropped plans to introduce a tax on high earners,

The "solidarity tax" on those earning more than 90,000 euros (£79,000) was one of several new measures announced earlier this month as the government aims to balance Italy's budget by 2013.
This announcement came after senior ministers met Mr Berlusconi on Monday.
The Bank of Italy has warned reduction in the austerity plan is not possible.
The government said it would instead step up measures to fight tax evasion.
In a statement issued after several hours of talks, the prime minister's office said it would also exclude years spent at university and military service from retirement age calculations, delaying retirement for some people.
There are also plans to spare the governments of small towns from cuts.
The plan is also reported to have caused tensions within the centre-right coalition government.
The Bank of Italy has warned that the government must still save a combination of 45.5bn euros ($65.5bn; £40.2bn) in higher taxes and lower spending.