World markets have experienced further volatile days with oil prices hitting a record high and the dollar a record low as gloomy US jobs data prompted fears that the world's largest economy had finally tipped into recession.
World stock and bond prices see-sawed, following a week of extreme uncertainty as investors saw the US Federal Reserve step into money markets in a bid to try to prevent the sub-prime mortgage crisis sparking off a new phase in the global credit turmoil.
Oil prices, which had been setting new highs through the week, jumped to $106.31 a barrel during the week in the US, while London Brent crude surged to $103.98.
Analysts said that although oil prices normally fall when there is a fear of recession, dealers were focusing on the fact that the US central bank, the Federal Reserve, was expected to cut another half a point off its key interest rate on March 19. This would boost the US economy and push the dollar, in which oil is priced, even lower.
"The logic of the past few weeks has been to ignore US fundamentals," said Mike Wittner, global head of oil research at Societe Generale.
The dollar slid to a record low against the euro, above $1.54 and fell against a basket of major currencies. Investors have been rushing out of dollars as a weakening economy means lower interest rates and lower dividends on assets.
Markets were particularly spooked by figures showing the US suffered a bigger-than-expected decline in jobs numbers last month, which prompted analysts to say the world's largest economy was now in recession.
A government report showed that jobs outside the volatile agriculture sector, known as "non-farm payrolls", fell by 63,000 in February, the biggest drop in nearly five years and much bigger than economists had expected.
The US Labour Department also revised the January number to a drop of 22,000 rather than 17,000 and December's figure was revised from a rise of 82,000 to one of just 41,000. The back-to-back January and February job losses were the first consecutive monthly declines since May and June of 2003.
Analysts said the latest numbers were as good as confirmation that the US economy was already in recession as a result of the housing market collapse and sub-prime mortgage crisis, which has already claimed victims across the globe, including Northern Rock.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be. Private employment has now fallen for three months in a row," said Nigel Gault, economist at Global Insight. "The Fed has to be more aggressive," said Richard DeKaser, chief economist for National City Corp in Cleveland, Ohio.
As the FTSE 100 closed down more than one per cent at 5,699.9, the Dow Jones industrial average had dipped below the 12,000 mark for the first time since mid-January as dealers sold off industrial stocks that would suffer if the US were in recession.