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Emergency meeting of G7 ministers called after biggest share slump since 2008 banking crisis Britain’s stock market suffered another major selloff yesterday, ending its worst week since the collapse of Lehman Brothers in 2008 with almost £150bn wiped off the value of the country’s top 100 companies. After a calamitous five days for stock markets on both sides of the Atlantic, the FTSE 100 closed 146 points lower at 5247 to record its third day of triple digit declines – a trading pattern last witnessed in the immediate aftermath of Lehman’s bankruptcy in September 2008. Better-than-feared American employment figures failed to calm the world’s panicky stock markets as the week of turmoil ended with fresh gyrations in share prices. A rally prompted by news that the world’s biggest economy generated an extra 117,000 jobs last month fizzled out within an hour after the German government ruled out providing extra money for Europe’s bailout fund and rumours swirled around Wall Street that the rating agency Standard & Poor’s was about to downgrade the US’s debt. But after European markets closed, Wall Street – which had suffered a 512-point fall on Thursday in one of its worse performances since the 2008 financial crisis – was helped higher by remarks from the Spanish government that prime minster José Lius Rodríguez Zapatero had agreed with his French counterpart Nicolas Sarkozy that greater co-ordination was needed. The Dow Jones Industrial Average, in a volatile day, was 70 points higher at lunchtime in New York; tensions were also eased after Italian prime minster Silvio Berlusconi promised to accelerate austerity measures by a year and summoned a meeting of G7 finance ministers as soon as possible. His remarks followed rumours that the European Central Bank was prepared to reverse its hardline stance and begin buying Spanish and Italian government bonds in return for an acceleration in structural reforms. Dealers have been frustrated by the lack of urgency shown by the ECB in supporting Italy and Spain. During Thursday’s market mayhem they had bought only bonds issued by Ireland and Portugal. Amid fears of an escalation in the crisis, Mervyn King, governor of the Bank of England, held a conference call with David Cameron and the chancellor, George Osborne – both on holiday – to discuss the impact of the financial crash on Britain’s banks and the struggling UK economy. Angela Merkel, the German chancellor, was preparing to discuss the situation with US president Barack Obama. The Bank is likely to cut its growth forecast for the UK when it publishes its latest quarterly inflation report on Wednesday. “They discussed the financial situation and the chancellor asked the governor for his judgment,” said a Treasury source. “They agreed to monitor the situation.” The Treasury source said the chancellor was keeping up the pressure on eurozone leaders to carry through the terms of the second bailout of Greece, which was intended to calm the markets when it was announced on 21 July but has failed to do so, with concerns widening to Italy and Spain. “What we are communicating to our European counterparts is you must deliver on what you have promised,” a Treasury source said. Stephen Hester, chief executive of Royal Bank of Scotland, which reported a loss for the first half of the year, also called on European leaders to take action but stressed the need for calm despite the wild gyrations in share prices. “The best we can do is keep our heads down, be calm and purposeful,” he said. RBS’s finance director, Bruce van Saun, admitted the atmosphere “feels pretty bad”, but said: “I don’t think it’s as bad [as 2008]. I don’t think banks will topple as they did because they’ve got more capital and liquidity.” The US jobless rate went down from 9.2% to 9.1%. Analysts said that while the increase in non-farm payrolls was bigger than the 85,000 jump expected by Wall Street the figures were not good enough to make traders feel less gloomy about the possibility of a global double-dip recession. Glenn Uniacke, senior dealer at Moneycorp, said there had been relief that the US jobs figures had been better than expected. “With employment growth in the world’s top consumer market an indicator of the future strength of the global economy, today’s non-farm payroll figures gave the markets a modest upside surprise and President Obama some short-term reprieve following the blood-letting of the past week. “However, the data won’t stop the rot and is not sufficient to change the bearish outlook from traders, with a sustained figure of 200,000-plus needed for any major positive impact on the unemployment rate. The markets were seen swinging wildly straight after the data, unsure how to interpret the ray of light in a otherwise gloomy week.” A breakdown of the report from the labour department showed private sector payrolls up by 154,000, while government jobs fell 37,000. US factories hired an additional 24,000 people, while retail, education and retail showed strong increases. The separate household survey, used to calculate the 9.1% unemployment rate, showed employment falling 38,000, and unemployment falling 156,000, with 193,000 people leaving the workforce. Michael Derks, chief strategist at FxPro Such, said there was a “growing pool of discouraged workers”, that had left only 58.1% of Americans of working age in employment, the lowest level for 30 years. Analysts said attention was now switching to the Federal Reserve, America’s central bank, which has a policy meeting next week, to see if it was contemplating a third round of electronic money creation through quantitative easing. “Next week’s US data shouldn’t be too bad with retail sales set to rise healthily given the already released auto sales,” said James Knightley at ING. “As a result, the Fed is likely to be more cautious on the outlook, but steer clear of further QE [quantitative easing] for now. That said, recent activity has been poor and the downward GDP revisions show that the economy has more spare capacity than previously thought.” Market turmoil FTSE Stock markets Dow Jones Banking Bonds Gilts European debt crisis European banks Europe Global economy Economics Global recession Larry Elliott Jill Treanor guardian.co.uk