UK shares head further south after yet more US jobs misery

Shares were under pressure again at the start of the second half of the year after yet more disappointing US jobs and manufacturing data.

The FTSE 100 was down 87.51 points, or 1.78%, at 4829.97.

The DJIA was down 76 points, or 0.73%, to 9705, having hit eight month lows yesterday.

A jump in the number of people claiming benefits this week weighed in early trade on Wall Street.

Rajesh Patel, head trader at Spread Co, said: ‘Weaker than expected jobless claims added to the market’s woes today. Jobless claims came in 20,000 above expectations at 472,000, more evidence that the US economy isn’t out of the woods by any means.'

The pain got worse later as the Institute for Supply Management index fell to 56.2% in June from 59.7% in May.

Economists had been expecting a more modest fall to 59%.

Julian Jessop, chief international economist at Capital Economics said: 'The fall in the manufacturing ISM from 59.7 in May to 56.2 in June means that the index is still consistent with annual growth in the US economy of 4% or so, but is perhaps the last thing that investors wanted to hear today given the worries about China and the euro-zone.'

But there was some unexpected good news from Spain, where a government bond auction did better than feared. The auction raised €3.5 billion at 3.65%, only a touch higher than the rate on a similar bond back in May.

There had been fear the bond would find little interest after credit ratings agency Moody's put the country's rating on review for a downgrade late last night.

The successful sale helped to lift the euro two cents against the dollar to $1.242 and weighed on gold, down $4 or 1.36% at $1291 as the news seemed to suggest people’s worst fears may now not materialise.