Despite a better than expected jobs report for September, Wall Street closed in the red on Friday after the credit rating warnings for Italy and Spain scared investors and downgrades for European and UK banks sent American bank shares sharply lower.

On top of that, the Moody's warning about Belgium's credit rating came too late for global markets, being released late Friday, US time, so that will cause concerns tonight, as will the results from the meeting between the French and German leaders.

The Dow lost 20.21 points, or 0.2%, at 11,103.12. The Standard & Poor's 500 Index was down 9.51 points, or 0.8%, at 1155.46, while the Nasdaq Composite Index dropped 27.47 points, or 1.1%, at 2479.35.

But for the week, however, the Dow rose 1.7%, the S&P 500 gained 2.1% and the Nasdaq was up 2.7%.

Wall Street's late slide put pressure on the ASX's SPI futures, which lost 26 points to 4,150, indicating losses at the start of trading today.

The flurry of downgrades in European banking hit US banks, which fell heavily on Friday, meaning our banks will come under pressure today.

The falls capped another volatile week for US banks and Friday's fall meant a return to the weakness of last Monday, after they steadied mid week.

The KBW bank index fell 4.3% on Friday, while Morgan Stanley dropped 6.2% to $US14.22 and shares of Bank of America tumbled 6.1% to $US5.90.

Goldman Sachs shares fell 5.3% on Friday and are down more than 44% for the year so far as more analysts forecast a third quarter loss for the bank (it reports October 18).

That fall is almost as much as Morgan Stanley's near 48% plunge this year as it continues to be the focus of market unease.

The Australian dollar slipped slightly to 97.68 USc, down slightly from 97.75 USc at Friday's local close.

The upsurge in fears about banks in the US overpowered the good news from the jobs report for September.

The US Labour Department said US employers last month added more jobs than analysts had expected. Nonfarm payrolls data for July and August also were revised upward.

US employers added 103,000 jobs in September, and the Labour department revised August's figures to show a gain of 57,000 jobs, up from a previous estimate of zero. July was revised up to 127,000 jobs, from 85,000.

But nearly half of the gains last month were due to the rehiring of 45,000 striking Verizon employees, so the performance wasn't as good as it seems.

And while the US unemployment rate held steady at 9.1%, US employers have added an average of only 72,000 jobs in the past five months.

The US economy must create about twice (around 150,000) every month just to keep up with population growth.

The private sector added 137,000 jobs in September, up sharply from August but below July's revised total, so no real growth.

Governments shed 34,000 jobs. Job gains occurred in construction, retail, temporary help services and health care.

Manufacturing cut jobs for the second straight month, which could also be a warning of what's to come.

The Fed reported on Friday night that US consumer credit surprisingly fell in August for the first time in months.

It was the biggest fall in more than a year.

That surprised analysts who had been looking for a big rise.

In Europe, the Stoxx Europe 600 Index rose 2.6% last week for the second positive week in a row as the Bank of England decided to restart its quantitative easing program and European governments made the right noises about supporting the zone's banks.

National benchmark indexes gained in 14 of Europe's 18 western markets.

France's CAC 40 rose 3.8%, London's FTSE 100 rose 3.4% and Germany's DAX finished up 3.2%.

But Greece's market dropped 6.8% in what was probably the most accurate of all market moves in the region last week.

The bank downgrades were ignored by eurozone investors for the most part on Friday.

In Asia The MSCI Asia Pacific Index slid 0.2% last week, but that was significantly better as it was down a nasty 5.1% earlier in the week.

The ASX 200 rose 3.9%, but Tokyo's Nikkei fell 1.1% and South Korea's Kospi Index dropped 0.6%.

Hong Kong's Hang Seng Index rose 0.7% after suffering big losses earlier in the week with China's markets shut for a week-long holiday.

Gold fell and oil rose on Friday as investors got mixed messages from the day's news.

The US jobs data was better than forecast, even if the detail was again weak, but the news from Europe of downgrades and more concerns about banks was the day's big negative.

So oil rose on the jobs report and gold eased.

The ratings downgrade and other poor news about European banks came too late in gold's trading session to have an impact.

The US dollar rose as a result of that news, so gold could be easier in Asian trading today, although news on the Merkel-Sarkozy summit might be positive for sentiment.

But Comex December gold futures lost $US17.40, or 1.1%, to $US1,635.80

That left it up 0.8% for the week, the first week it has finished higher after four weeks of losses.

Comex December silver fell $US1.01, or 3.2%, to $US30.99 an ounce, but like gold, finished the week higher than it started.

Silver rose 3% in a stronger performance than gold.

Comex copper ended higher with the December contract adding 3 USc, or 0.8%, to $US3.27 a pound.

That left the metal up 3.8%, also its first up week after losses for four weeks in a row.

Oil rose In New York with Nymex's WTI November contract adding 39c to close at $US82.98 a barrel.

Brent North Sea crude for November in London trade rose 15c to settle at $US105.88.

Copyright Australasian Investment Review.
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