Wall Street stocks swung violently between gains and losses in a heavily traded session a day after indexes posted their worst losses in two years. The MSCI's All-Country World Index fell 1.3 percent on the day. The Dow Jones industrial average eked out a small gain, rising 0.5 percent. Composite trading volume was the highest since the day after the US "flash crash" in May 2010, when US equity markets plummeted 9 percent in a single day.
World leaders moved to address the turmoil, which has been driven by fears the global economy is slipping back into recession and by the inability of policymakers in Europe to extinguish the debt crisis engulfing the region. Italy, under pressure to help halt the market rout that is endangering the global economy, pledged to speed up austerity measures and social reforms in return for European Central Bank help with funding.
"That was the real thing that got us started (off the lows)," said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York. That "may clear the way for the ECB to start buying some Italian bonds." The ECB's reluctance to buy Italian bonds and ease pressure on markets has frustrated investors. Sources with knowledge of the matter said earlier on Friday that the bank is willing to take that step only if the country carries out reforms. The euro last traded up 1.3 percent at $1.4278 on trading platform EBS. The US dollar fell broadly, reversing some of the prior day's sharp gains, as traders feared a downgrade to the United States' credit rating was imminent. Rumours circulated in jittery markets that a downgrade from ratings agency Standard&Poor's could come as early as Friday night. The agency declined to comment on the rumour.
China and Japan called for global co-operation. French President Nicolas Sarkozy was to discuss the financial markets with German Chancellor Angela Merkel and Spanish Prime Minister Jose Luis Rodriguez Zapatero. Brazilian Finance Minister Guido Mantega said the world economy "is in a situation of stress" and South American nations must work together to create mechanisms to protect their economies from turmoil.
News of stronger-than-expected US jobs growth in July relieved some of financial markets' worst fears, but that was not enough to spur sustained buying after an early bounce. US Treasury debt prices fell after the jobs data, reversing some of the gains made in Thursday's panic of risk-averse trading. The 10-year Treasury note lost 1-13/32 to yield 2.56 percent. The Dow Jones industrial average gained 60.93 points, or 0.54 percent, to 11,444.61. The Standard & Poor's 500 Index dropped 0.69 point, or 0.06 percent, to 1,199.38. The Nasdaq Composite Index lost 23.98 points, or 0.94 percent, to 2,532.41. The S&P 500 fell 7.2 percent over the week, its largest weekly percentage drop since November 2008.
European stocks fell 1.8 percent to end at 975.02, their biggest weekly decline in nearly three years after hitting their lowest in a year. Industrial commodities were also hit. Three-month copper fell 2.6 percent to $9,041 a tonne, the lowest since June 29. It lost 1.9 percent in the previous session.
The Reuters-Jefferies CRB index, a global commodities benchmark, fell to a seven-month low as raw materials markets experienced one of their biggest sell-offs since the financial crisis. But Italian 10-year government bond yields rose above their Spanish equivalent. Italy has emerged as the market's major concern after a rescue deal that was intended to stop the spread of the crisis failed to convince investors it had the firepower to ease pressure on the vast Italian bond market.