European stock markets remain volatile

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European stock markets remain volatile

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European stock exchanges have trimmed their earlier losses after falling sharply in early trading on Friday. Some indexes even turned positive late in the afternoon.

That was because there was some good news from the US where job growth accelerated more than expected in July. Private employers stepped up hiring, a development that could ease fears the economy was sliding into a fresh recession

US payrolls increased 117,000. That was above market expectations for an 85,000 gain. The unemployment rate dipped to 9.1 percent from 9.2 percent in June, but this was mostly the result of people leaving the labour force.

But investors are still nervous about the growing debt crisis gripping the euro zone as well as the US, with the markets particularly shaken by the increasing cost of borrowing for the more debt-burdened economies of Italy and Spain.

European Central Bank chief Jean-Claude Trichet kept EU interest rates on hold on Thursday, but the situation remains volatile.

Earlier the Asian markets closed well down, falling as much as five per cent as investors dumped shares and headed for the relative safety of cash and government bonds.

In Tokyo the Nikkei fell 3.4 percent to its lowest level since the aftermath of the earthquake and tsunami in March. In Hong Kong the main share index fell 4.4 percent.

There has been widespread demand for policymakers to beef up their plans to tackle the euro zone’s crisis and prevent the US economy in particular from sliding back into recession.