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Optimism over upcoming U.S. jobs figures helped stocks and the euro to rally on Friday despite further evidence that the 17-nation eurozone is heading for recession.

Following a run of fairly strong U.S. economic data, investors are increasingly confident that the world’s largest economy is over a soft patch from last summer, helping to offset the global economic impact wrought by Europe’s ongoing debt crisis.

Figures released Friday provided further evidence that the eurozone is heading for a recession. Eurostat, the EU’s statistics office, said retail sales dropped 0.4 percent during the month, in contrast to expectations for an increase of the same amount.

The December data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.

The highlight of the day in the markets will be the monthly U.S. nonfarm payrolls data. Expectations are that the U.S. economy generated around 150,000 jobs during January. Though that is unspectacular for an economy recovering from its worst recession since World War II, the amount of jobs being created is up from levels seen just a few months ago.

“Volatility is likely to remain low until these figures are out, with traders opting to sit and await news rather than heavily commit themselves,” said David Jones, chief market strategist at IG Index.

In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 5,823 while Germany’s DAX rose 0.4 percent to 6,682. The CAC-40 in France was 0.5 percent higher at 3,394.

Wall Street was also poised for a solid opening, though how it actually performs will hinge on the payrolls data, which are released an hour before the bell free credit score. Dow futures and the S&P 500 futures were both up 0.2 percent.

The euro was also garnering support alongside stocks _ when appetite for risk is elevated, the euro often finds favour. It was trading 0.3 percent higher at $1.3177 despite the retail sales disappointment.

The focus on the U.S. has proved a welcome diversion for some traders from monitoring the daily grind of Europe’s debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated. A deal is expected soon, though that has been the official line for a few weeks.

Earlier in Asia, the picture was mixed.

Japan’s Nikkei 225 index fell 0.5 percent to close at 8,831.93 but Hong Kong’s Hang Seng ended marginally higher at 20,756.98.

Mainland Chinese shares extended gains fueled by news of fresh support for the farming and small-business sectors, with the benchmark Shanghai Composite Index rising 0.8 percent to 2,330.41 while the Shenzhen Composite Index added 1.5 percent to 878.29.

Oil markets were also relatively subdued. Benchmark oil for March delivery was up 40 cents to $96.76 per barrel in electronic trading on the New York Mercantile Exchange.

____

Pamela Sampson in Bangkok contributed to this report.

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Manufacturing in India and China improved in December, a sign the world

Yemeni President Ali Abdullah Saleh was in Saudi Arabia on Wednesday to sign a U.S.-backed power transfer deal mediated by Gulf Arab states to resolve the impoverished country’s crisis, Yemen’s state television reported.

Saleh has repeatedly promised to sign the Gulf-brokered agreement, only to change his mind every time. Under the deal, Saleh would step down and transfer power to the vice president in exchange for immunity from prosecution.

The TV said Saleh arrived in the Saudi capital Riyadh on Wednesday morning but did not say when the deal would be signed. It said that along with Gulf Arab representatives who sponsored the agreement, European and American envoys would also attend the signing.

Saleh has clung to power despite an 8-month-old uprising, mass protests calling for his ouster and a June assassination attempt that left him badly wounded and forced him to travel to Saudi Arabia for more than three months of hospital treatment.

But things appeared to be shifting on Tuesday, when the U.N. secretary-general’s envoy to Yemen, Jamal bin Omar, said all parties had agreed on a plan that would have Saleh step down.

“All parties agreed today on the Gulf initiative and the implementation of its mechanism,” bin Omar said after meetings with Yemen’s vice president, Abed Rabbo Mansour Hadi, in Sanaa.

Security in Yemen has unraveled amid the uprising against Saleh’s 30-year reign. The situation is particularly bad in the south, where al-Qaida militants _ from what is perhaps the world’s most active branch of the terror network _ have taken control of entire towns, using the turmoil to strengthen their position.

The unarmed protesters have held their ground with remarkable resilience, flocking to the streets of Sanaa and other Yemeni cities and towns to demand reforms from the autocratic government and braving a violent crackdown by government forces that has killed hundreds.

But their uprising, inspired by other Arab revolts in the region that saw longtime rulers of Egypt and Tunisa go, has at times been hijacked by Yemen’s two traditional powers _ the tribes and the military _ further deepening the country’s turmoil.

Breakaway military units and tribal fighters have been battling in Sanaa with troops loyal to Saleh, in fighting that has escalated in recent months.

An impoverished nation of some 25 million people, Yemen is of strategic value to the United States and its Gulf Arab allies, particularly Saudi Arabia. It sits close to the major Gulf oilfields and overlooks key shipping lanes in the Red and Arabian seas.

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Chrysler is counting on a new Jeep sport utility vehicle and its strong brand name to help withstand uncertainty in the European auto market and expand into new markets in China and Russia, the automaker’s chief executive said Wednesday.

The company announced plans to spend $500 million at its Ohio assembly complex that will make the new model and add 1,100 jobs by late 2013. The expansion is part of a $1.7 billion investment to build the new Jeep.

Chrysler CEO Sergio Marchionne said Jeep is becoming the star of its European market and that sales have been doubling.

“It’s the best brand Chrysler owns by a long margin,” he said. “It’s got a glorious history.”

Italian automaker Fiat SpA, which now controls Chrysler, has been hit hard this year by slumping overall sales in Europe. It has been turning more toward business in the United States and Brazil, said Marchionne, who is CEO of both companies.

He said next year will be even worse in Europe. “The majority of the growth and expectations around Fiat are unfortunately outside the European context,” he said

Marchionne said that he’s confident the leaders forming the Italy’s new government can help it avoid financial disaster, but he added that instability there could influence where it locates its new headquarters when Fiat combines with Chrysler.

He is working toward bringing the two automakers together and faces the thorny political issue of where to base the company. The instability in Italy can’t be overlooked, he said Wednesday.

“I would be lying to you if I told you it didn’t,” he said. “It’s one of the things we’ll look at. That’s not to say the current situation would force us to move away from Italy. We’re committed to the industrial back bone of the country.”

Premier Mario Monti formed a new Italian government on Wednesday puts bankers, diplomats and business executives in charge instead of politicians. The former European Union competition commissioner said economic growth is a top priority and will put out an emergency plan Thursday

“Monti has all of the qualities to get this done,” Marchionne said. “It’s in the interest of every Italian to get behind him.”

Whether the country can recover soon depends on its political forces, he said. “If they do, it can be done relatively quickly,” he said. “The execution may take longer, but the plan can be put in place.” `

Sales of the stylish Fiat 500 mini car have been far below expectations in the United States since its debut in March, Marchionne said. It’s Fiat’s first vehicle in the U.S. since it pulled out of the market in 1983.

He blamed the low sales on a lack of dealerships selling the Fiat and said more are coming on line.

While Fiat is struggling, Chrysler is moving toward its first annual profit since 2005 behind strong third quarter sales of its new or revamped Chrysler, Dodge, Jeep and Ram cars and trucks.

Marchionne thinks the Jeep brand can continue to grow worldwide behind its unique history. Originally made for the military, workers in Toledo have been producing Jeeps since 1941.

“The horrible thing about Jeep is it hasn’t been exploited internationally,” he said. “It’s off-road capabilities are unique in the marketplace and we need to preserve that going forward.”

No decision has been made on what the new model will be called. Marchionne said it will be more technologically advanced than the Jeep Grand Cherokee.

The assembly plant in Ohio that now has 1,800 workers makes the Jeep Wrangler and Liberty along with the Dodge Nitro and will be central to the company’s future and its SUV exports, Marchionne said.

It’s likely the plant will build more vehicles in the coming years, he said. He also didn’t rule out expanding Wrangler production at the plant if sales take off outside the U.S.

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Greece’s embattled prime minister and main opposition leader agreed Sunday to form an interim government to ensure the country’s new European debt deal and oversee early elections, capping a week of political turmoil that saw Greece facing a catastrophic default and threatening its euro membership.

Greek leaders had been anxious to end a severe political crisis with some positive result before Monday, when the country heads to a meeting of eurozone finance ministers in Brussels. The initial agreement, which will see Prime Minister George Papandreou step down, came after a week of drama sparked by his announcement he was taking the debt deal to a referendum. He withdrew that plan Thursday after intense opposition from European leaders and his own Socialist lawmakers, many of whom called for him to resign.

Papandreou “has already stated he will not lead the new government,” the statement from the president’s office said.

He is to meet again Monday with opposition leader Antonis Samaras to seek agreement on who will head the new government and who will be included in its Cabinet, the president’s office said.

A planned meeting with the leaders of all political parties represented in parliament, which was to take place Monday evening, was canceled after parliament’s two leftist parties refused to attend, the office said.

The statement came after a late-night meeting between Papandreou and Samaras called by President Karolos Papoulias to end a two-day deadlock. Direct talks had failed to get off the ground as Papandreou had agreed to step aside but only after power-sharing talks settled on a new government makeup, and Samaras insisted he wanted snap elections and would not start negotiations unless Papandreou resigned first.

An opposition conservative party official said Samaras’ party is “absolutely satisfied” with the outcome of the talks and that party officials were to hold meetings late Sunday night with Finance Minister Evangelos Venizelos and his advisers to discuss how long it would take to finalize the new debt deal and when elections could be held.

“Our two targets, for Mr. Papandreou to resign and for elections to be held, have been met,” the official said, speaking on condition of anonymity to discuss the process.

The crisis was sparked after Papandreou’s shock announcement on Oct. 31 that he wanted to put a new European debt deal aimed at rescuing his country’s economy to a referendum. That plan caused an uproar in Europe, with the leaders of France and Germany saying any popular vote in Greece would decide whether the country would remain in the euro direct payday lenders. European officials also said the country would not receive the vital euro8 billion euro installment of its existing euro110 billion bailout until the uncertainty in Athens was over.

Papandreou’s announcement also spooked international markets, leading stock markets to tumble and led to calls in Greece for Papandreou’s resignation _ even from among his own Socialist lawmakers and ministers _ with many saying he had endangered Greece’s bailout.

The prime minister withdrew the referendum plan on Thursday, after Samaras indicated his party would back the new debt deal, which was agreed upon after marathon negotiations in Europe on Oct. 27.

Greece has been surviving since May 2010 on its initial bailout. But its financial crisis was so severe that a second rescue was needed as the country remained locked out of international bond markets by sky-high interest rates and facing an unsustainable national debt increase.

The new European deal, agreed on by the 27-nation bloc on Oct. 27 after marathon negotiations, would give Greece an additional euro130 billion ($179 billion) in rescue loans and bank support. It would also see banks write off 50 percent of Greek debt, worth some euro100 billion ($138 billion). The goal is to reduce Greece’s debts to the point where the country is able to handle its finances without relying on constant bailouts.

Greece’s lawmakers must now approve the new rescue deal, putting intense pressure on the country’s leaders to swiftly end the political crisis so parliament can convene and put the debt agreement to a vote.

“We know that there can be no elections now,” Papandreou had said during an earlier emergency Cabinet meeting, noting that snap polls would delay the approval of the new debt deal. “This cooperation, however, is necessary and will be beneficial for the climate in our country and internationally.”

In return for bailout money, Greece was forced to embark on a punishing program of tax increases and cuts in pensions and salaries that sent Papandreou’s popularity plummeting and his majority in parliament whittled down from a comfortable 10 seats to just three.

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Associated Press writer Nicholas Paphitis in Athens contributed to this report.

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Investors remain anxious to find safety even as the stock market moves back toward positive territory for the year.

They’re on pace to yank more than $20 billion out of stock funds this month, the fourth time in the last five months, scarred by the volatility over everything from the sluggish economy to Europe’s debt crisis to the threat of another global recession.

Despite the recent market uptick, there’s still plenty to worry about.

Fears remain that the Greek government may fail to pay its massive debts, which would wreak widespread financial havoc. Federal Reserve Chairman Ben Bernanke hasn’t backed off from his statement early this month that the economic recovery “is close to faltering.” And investors aren’t fully convinced that the selloff that pushed the Standard & Poor’s 500 index down 14 percent in the third quarter has run its course.

All the added uncertainty fuels any temptation to abandon stocks, as many already have done.

But “playing it safe” comes at a cost. Over the long run, fleeing to cash or buying Treasurys may be even more dangerous in this era of low interest rates as well as low returns. It can do permanent damage to your money’s buying power and your retirement prospects.

That’s the message financial advisers have been hammering home to clients who want to abandon the stock market, fearing a repeat of the 2008 meltdown or who are simply fed up with all the plunges.

Disillusioned investors, too, risk chasing an illusion of safety. So-called safe havens aren’t all that safe anymore.

“This is what I say to clients: `There is no safety’,” says Femi Shote, an investment adviser with Asset Harvest Group in McLean, Va. “What I preach is resilience, not safety.”

Hints of improvement in the latest corporate results hold out hope for investors, while highlighting the risk of being on the sidelines. Joseph LaVorgna, chief U.S. economist at Deutsche Bank, says the stock market is “pretty cheap” after all the selling and could come back quickly.

“All this volatility doesn’t engender a lot of confidence,” LaVorgna says. “But some good news can quickly restore it. If it looks like the economy is still growing and there’s some resolution in Europe, we could have the tonic for a powerful rally.”

Whether that occurs soon or not, here’s a look at the numbers confirms the meager payoffs of playing it safe.

_ Cash: Although it can provide a sense of security, cash doesn’t hold its value well over time. The average yield on a money-market account is just 0.54 percent, according to Bankrate.com. Even the best-paying online savings accounts pay 1 percent or less. As recently as the summer of 2008, just before the financial crisis hit full-force, you could earn 5 percent on such accounts.

Certificates of deposit also pay poorly. The highest rates available are 1.15 percent on a one-year CD and 2.2 percent on a five-year CD.

_ U.S. Treasury notes: The safety of bonds is less rewarding than it used to be. The yield on the benchmark 10-year Treasury fell to a record-low 1.71 percent last month and remains near 2 percent.

_ Gold: It is far too speculative to be used wisely as protection against a falling stock market. But gold has been embraced by investors worried about rising U.S. debt, the possibility of inflation and a spreading European debt crisis. More and more piled in as the price nearly tripled in four years, reaching a record $1,891.90 on Aug. 22.

Since then, it has tumbled all the way back near $1,600.

Aside from gold’s recent slide, a market-weary investor might reason that at least cash and other options offer less downside risk than stocks and the most protection for their accounts.

Investment experts, however, consider that thinking short-sighted quick cash. If you’re too conservative, they note, you can outlive your money.

Inflation historically averages about 3 percent, so putting money aside that earns less than 1 percent means its value is eroding over time. Keeping money in the stock market is the likeliest way to stay ahead of inflation, or at least keep pace.

Even in a period that included two sharp declines in the market, the S&P 500 index had an average annual return of 7 percent for the 15 years from mid-1996 through June 30. That’s hard to match elsewhere.

Investors who ditch stocks are removing future growth from their portfolios and need to compensate elsewhere.

“When you sell, you need to simultaneously increase the amount you’re contributing to that account,” says Stuart Ritter, a certified financial planner for T. Rowe Price in Baltimore. “Or if you’re in retirement, you need to withdraw less. Otherwise you have no chance to keep up with inflation.”

Then there’s what economists call the opportunity cost — what you miss out in the long haul by leaving.

Over the longer term, the case for staying in stocks is even more compelling. History says the market is highly unlikely to decline over any 10-year period, recent times notwithstanding. On a rolling basis, the S&P 500 has produced losses in only four out of 76 different 10-year periods since 1926, according to a T. Rowe Price analysis.

Those who want to keep their cash on the sidelines until the market calms down, even for a few days, do so at risk of missing a comeback. An investment that excluded the best 10 days of the S&P 500 in the past decade would have posted an annual loss of 1.5 percent rather than a gain of 5.3 percent.

Investors who sat out even part of the 2009-11 bull market learned the hard way.

When panicked clients call Joe Adkins of Financial Advisors International with a request to sell after seeing the Dow drop hundreds of points, the Orlando, Fla., money manager offers a ready reminder. Had they sold stocks in March 2009 when the market bottomed and bought back in in December 2009, he tells them, they would have missed a 4,000-point gain in the Dow — nearly two-thirds of the two-year bull-market rally.

“You shouldn’t manage your money based on the headlines,” his advice goes. “Just weather the storm, because if you go to cash you risk running out of money.”

Besides telling clients to stick with the market, many advisers are steering them toward large, stable, blue chip stocks with a history of paying annual dividends of 3 percent or more.

Others recommend sinking a small percentage of holdings into alternative investments _ a catch-all term for such instruments as hedge funds and commodities. Alternative investments can be used as a tool to reduce overall risk through diversification. But the complexity, cost and lack of liquidity typically don’t make those the safest of investments, either.

Ultimately, those who can’t tolerate short-term risk for the likelihood of long-term gains may find a comfort level with simply a smaller percentage of their money in stocks.

They just have to realize that caution will probably cost them in the end, according to Pat Dorsey, director of research and strategy for the Sanibel Captiva Trust Co. in Chicago.

“Certainly if you are just a very nervous person, prone to getting out of the market every time the Dow drops 2 or 3 percent, having higher cash or bond allocation may make sense,” Dorsey says. “But you’ve got to dial down your (lifestyle) expectations for the future if you do that.”

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Authorities on Mexico’s gulf coast are preparing for Tropical Storm Nate, while air and sea search teams hunted for 10 oil workers missing since abandoning a disabled research vessel in stormy waters.

Forecasts said Nate was still moving toward the coast very slowly, but was expected to pick up some speed Saturday. They said the storm would approach the coast Sunday, mostly likely just below hurricane strength.

Mexico’s state oil company, Petroleos Mexicanos, had two ships searching for the missing oil workers. A port official said Friday that they included four Americans, four Mexicans, one from Kazakhstan and a 10th of unconfirmed nationality.

The workers, employees of Houston-based Geokinetics Inc., called for help Thursday afternoon after leaving a vessel known as a liftboat, the Trinity II, on an enclosed life raft.

“We’re deeply concerned about the incident in the Gulf of Mexico involving our employees and others who had to abandon a disabled liftboat due to conditions brought about by Tropical Storm Nate,” Geokinetics spokeswoman Brenda Taquino said.

A liftboat can lower legs to the sea floor and then elevate itself above the water level. This one was being used as a recording vessel and housing for the crew, and it was in waters about 25 feet (8 meters) deep.

Randy Reed, president of the vessel’s owner, Trinity Liftboat Services LLC in New Iberia, Louisiana, was unavailable for comment Friday, a person answering the phone at his office told The Associated Press. But Reed told the Advertiser newspaper in Louisiana that the rescue effort involved boats, helicopters and aircraft conducting a grid search of the area where they went missing in the Bay of Campeche.

“We’re optimistic. They’re good seamen. They’re professionals at what they do,” Reed said. “The life raft is out there, we just haven’t found it yet … We’re all working diligently to locate the raft so we can locate our loved ones.”

The captain of the 94-foot(28.6-meter), 185-ton Trinity II reported they were abandoning the vessel about midday Thursday, and a ship several miles (kilometers) away also reported seeing the crew enter the life raft.

But there had been no communication since.

The Mexican navy said Friday night that sailors had reached the Trinity II and found no crew. It said it had a plane, three helicopters and four boats searching for them.

Taquino said the life raft was a sealed capsule containing enough food and water to last for several days, but there was no way to communicate with it.

Tropical Storm Nate was drifting slowly west-southwestward at about 4 mph (6 1/2 kph) over the southern gulf late Friday with maximum sustained winds of near 50 mph (80 kph), according to the U.S. National Hurricane Center in Miami. It was centered about 205 miles (330 kilometers) east-northeast of Veracruz. Forecasters said it was expected to hit Mexico’s gulf coast Sunday possibly as a hurricane.

A tropical storm warning was declared along the coast from Tampico to Veracruz. A hurricane watch also was posted for the coast, meaning there was a chance the storm could strengthen into a hurricane.

Pemex said it had evacuated 473 workers from platforms off the coasts of the gulf coast states of Veracruz and Tamaulipas. Mexico’s gulf ports were closed to navigation.

Tropical Storm Maria, meanwhile, headed toward the Lesser Antilles at the eastern end of the Caribbean late Friday, while rain from what had been Tropical Storm Lee continued inundating a wide portion of Pennsylvania and other northeastern states, leaving at least seven dead.

Maria’s maximum sustained winds Friday night were near 45 mph (75 kph), with some slight strengthening possible, according to the U.S. National Hurricane Center in Miami. It was moving toward the west-northwest near 12 mph (19 kph).

A tropical storm warning was in effect for a host of islands: Antigua, Anguilla, Barbuda, Montserrat, Nevis, St. Kitts, British Virgin Islands, U.S. Virgin Islands, Guadeloupe, St. Maartin, Saba, St. Eustatius, St. Barthelemy, St. Marteen, Martinique, Dominica, and Puerto Rico including Vieques and Culebra.

On its current forecast track, Maria’s center would reach the Leeward Islands early Saturday and be near the Virgin Islands by Saturday night, the hurricane center said.

Out in the Atlantic, Hurricane Katia was moving northeast over open water after passing between the U.S. and Bermuda. Despite not hitting land, the hurricane center said large swells generated by the Category 1 storm would continue affecting the U.S. East Coast and Bermuda.

Katia was centered midway between Bermuda and Nova Scotia and was moving northeast near 46 mph (74 kph). It had maximum sustained winds of 85 mph (140 kph). The long-term forecast indicated it could reach Scotland as a storm on Monday.

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Here’s a piece of bright news on this otherwise gloomy economic week.

Foreclosures are down. Again. For the sixth month in a row.

The number of houses in the later stages of the foreclosure process in metro St. Louis fell 41 percent in July, according to data firm RealtyTrac. They recorded 1,234 filings, the second-slowest month here in three years. It’s the fourth straight month of at least a 20 percent year-over-year decline, and for 2011 as a whole, filings here are down 22.4 percent.

For a few months, RealtyTrac suspected most of the slowdown was because of processing delays by banks, as lenders made sure they dotted every ‘i’ in the wake of last fall’s “robo-signing” scandals. Now, though, they think the many efforts to help troubled borrowers stay in their houses may, finally, be paying off.

The delays, said Chief Executive James Saccaccio, plus the ’smorgasbord of national and state-level foreclosure prevention efforts … may be allowing more distressed homeowners to stave off foreclosure.”

Until the economy turns around, he said, any such relief will be temporary. But some say the economy can’t turn around until the housing market at least stabilizes. And the housing market won’t stabilize until foreclosures get back to a manageable rate

The European Central Bank says it will “actively implement” a bond-purchase program that could boost Spanish and Italian bonds and drive down interest yields that threaten those countries with financial disaster.

Sunday’s statement from bank President Jean-Claude Trichet comes as global finance officials discussed ways to ward off more turmoil ahead of the opening of financial markets on Monday, the first substantial trading after the U.S. lost its triple-A bond rating from Standard & Poor’s on Friday.

Officials from the Group of 20 rich and developing countries also held talks aimed at minimizing market shocks. G-7 officials were reportedly to confer before market open in Asia as well.

The G-7 includes Britain, Canada, France, Germany, Italy, the U.S. and Japan, while the G-20 includes those countries and others with large and emerging economies.

The burst of activity on a Sunday in August underscored how government debt levels in Europe and the U.S. have unsettled financial markets _ and sharpened fears that debt troubles could derail the global recovery from the 2007-2009 financial crisis.

The statement from the ECB, issued after a conference call among its officials, did not say which countries’ bonds it would buy.

But the beneficiaries are expected to be Italy and Spain, market analysts say. Italy and Spain are trying to avoid the spiraling interest rates that forced Greece, Ireland and Portugal to seek bailout loans. Purchases could drive up bond prices, which move in the opposite directions from interest yields.

Last week, yields for both countries were above 6 percent, moving toward the levels that upended the three smaller countries. Italy in particular is regarded as too large for Europe’s euro440 billion bailout fund to rescue, raising the possibility of a financial disaster that could devastate the eurozone economy.

Analysts at Royal Bank of Scotland said recent moves by Italy to strengthen its finances helped bring the ECB to its decision. The bank was reluctant to come to the rescue unless governments first close the holes in their finances.

The bank statement Sunday said it was “essential” for them to follow through on their commitments.

Italian Premier Silvio Berlusconi said last week that Italy would balance its budget in 2013, a year earlier than previously expected, and speed up other budget measures.

“The ECB will start a large scale bond buying of Italian and Spanish sovereign bonds on Monday morning in our view as euro area governments have signed up to additional fiscal measures where needed,” they said.

They said the purchases could run euro2.5 billion ($3.5 billion) a day and “will stop the collapse of the bond market in countries under stress.”

Eurozone officials agreed at a summit July 21 to give their bailout fund the ability to buy government bonds. But national parliaments are on summer break and have not approved the change yet, leaving the ECB as the last resort as market turmoil increased.

Italy has debt equivalent to 120 percent of annual economic output, the second highest in the eurozone behind Greece, and weak prospects for economic growth that would help pay it down.

Last week already saw markets around the world deep in the red amid fears the global economy may be weakening and the uncertainty created by Europe’s sovereign debt crisis.

In a sign of early fallout, Middle East markets tumbled Sunday on their first day of business after the downgrade. Egypt’s benchmark EGX30 index fell more than 4 percent, and other Gulf markets also were sharply lower. Israel’s benchmark TA-25 index plunged 7 percent to close at 1,074 points.

U.S. markets and others reopen Monday but have had rough patches recently. The Dow Jones industrial average dropped 512 points Thursday, its worst performance since the financial crisis of 2008, and regained only a fraction of that drop Friday.

Many economists see the world’s big central banks as the last line of defense at this moment in the crisis, after policymakers in Europe and the U.S. have failed to agree on the kind of shock-and-awe moves that many investors demand.

Investors have also been calling on the U.S. Federal Reserve to start pumping money into the American economy again to help underpin the slowing economic recovery.

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World stock markets slid Monday, dragged by global economic angst after an unexpectedly weak U.S. jobs report and surging inflation in China.

Wall Street’s sharp drop before the weekend extended to Asia and Europe, where investors digested news that U.S. employers created the fewest number of jobs in nine months. The 18,000 net jobs in created in June were a fraction of what many economists expected and dampened hopes that the economy is improving.

“Economic news in the U.S. was disappointing,” said a Barclays Capital report Monday. “The employment report was weaker than expected across the board _ employment, unemployment, hours, and wages all reflected the same worrisome trend.”

As trading got under way in Europe, France’s CAC 40 was off 1.3 percent at 3,861.08 and Britain’s FTSE 100 dropped 0.2 percent to 5,976.79. Germany’s DAX shed 0.9 percent to 7,337.62. Wall Street was also set for losses with Dow futures down 0.7 percent at 12,529.

In Asia, Japan’s Nikkei 225 stock average lost 0.7 percent to 10,069.53 and Hong Kong’s Hang Seng retreated 1.7 percent to 22,347.23. South Korea’s Kospi fell 1.1 percent to 2,157.16 while the Shanghai Composite index edged up 0.2 percent to 2,802.69.

Also dragging sentiment was data released Saturday showing China’s inflation accelerated to a three-year high in June even as the overheated economy began to cool.

Consumer prices rose 6.4 percent over a year ago, a sharp jump from May’s 5.5 percent rate, China’s government said Saturday. Communist leaders declared taming prices their priority this year, but they have been frustrated amid inflation’s steady rise.

In Australia, the government’s new carbon tax proposal battered stocks. The S&P/ASX 200 shed 1.6 percent to 4,582.30.

Prime Minister Julia Gillard unveiled a plan Sunday to force the country’s 500 worst polluters to pay 23 Australian dollars ($25) for every ton of carbon dioxide they emit.

Australia’s flagship carrier Qantas said Monday the tax will cost it 110 million to 115 million Australian dollars ($118 million to $123 million) for the 2013 financial year and lead to an increase in passenger fares.

Qantas Airways shares tumbled 3.3 percent, and Virgin Blue Australia Holdings fell 2.9 percent.

Another big loser in Australia was Rupert Murdoch’s News Corp., which fell more than 5 percent. The 80-year-old CEO arrived in London over the weekend to tackle a phone-hacking crisis that led to the quick demise of his best-selling Sunday tabloid, the News of the World.

In Tokyo, chip-related shares tumbled after Credit Suisse downgraded its rating on Elpida Memory Inc. to “underperform” from “neutral.” The issue fell more than 13 percent, while chip equipment maker Tokyo Electron Ltd. slid 2.9 percent.

“PC demand continues to slump, reflecting market saturation in advanced countries, and the severe delay in the Chinese laptop market staging a recovery,” Credit Suisse analyst Hideyuki Maekawa said of DRAM chips.

In New York Friday, the Dow Jones industrial average lost 62.29, or 0.5 percent, to 12,657.20.

The Standard and Poor’s 500 index fell 9.42 points, or 0.7 percent, to 1,343.80. The tech-heavy Nasdaq composite dropped 12.85, or 0.4 percent, to 2,859.81.

Oil prices fell to below $96 a barrel Monday in Asia amid signs of a struggling U.S. economy.

Benchmark oil for August delivery was down $1.29 to $94.91 a barrel in electronic trading on the New York Mercantile Exchange. Crude gave up $2.47 to settle at $96.20 on Friday.

In London, Brent crude was steady at $118.33 per barrel on the ICE Futures exchange.

The euro was trading at $1.4124. The dollar was changing hands for 80.75 yen.

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