The FTSE fell 74 points, or 1.2%, while the German Dax and French CAC tumbled 1.5% as markets digested rumors that the resignation of Portugal's finance minister and foreign minister could be followed by more colleagues. Market unease over the health of the world economy was exacerbated by the political drama unfolding in Egypt and a weakening in China's growth.
The Portuguese ministers quit the coalition government this week in a row over the ruling party's handling of the country's economic plight, amid fears that they will be followed by two ministerial colleagues who are members of the junior coalition partner. If that happened, observers fear that they could take down the centre-right government. However, the junior coalition party, CDS-PP, said this evening that there would be no more ministerial resignations.
European commission president José Manuel Barroso, a former Portuguese premier, said the indebted nation risked damaging its hard-earned financial credibility after two years of closely following its €78bn (£66.4bn) bailout programme, coordinated by the International Monetary Fund, European Union and European Central Bank.
"This delicate situation requires a great sense of responsibility from all political forces and leaders," he said.
The government's future hung in the balance after president Aníbal Cavaco Silva's office said he would meet the leader of the main opposition Socialists and other parties to discuss the deepening schism in the coalition. Under the constitution, he has the power to dissolve parliament and can invite opposition parties to form a government.
Speaking in Berlin, where he was attending the EU summit on youth unemployment, prime minister Pedro Passos Coelho reiterated that he had no plans to resign. He said: "I am confident that we will be able to surpass this difficulty … I hope this internal crisis can be overcome very quickly."
With no solution imminent, the euro fell and the interest rate on Portuguese government debt soared past the 7% level – where debts are considered unsustainable – to hit 8.1% at on point, before settling back at 7.5%. The PSI 20 stock index in Lisbon fell by 5%, led by sharp losses of over 10% in bank shares
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Last month, Bernanke said the US economy was improving but Washington's budget cuts were stalling the recovery. Some business leaders and Republicans argue that the imposition of the president's healthcare laws is slowing hiring, while Democrats say Republican-backed spending cuts are hurting the economy.
Responding to the latest monthly figures, Alan Krueger, chairman of the White House's council of economic advisers, said: "In the four years since the recession ended in June 2009, the economy has added 5.3m jobs, thanks to the resilience of the American people and policies like the Recovery Act, which helped bring the recession to an end and put us on the path to recovery. With the recovery gaining traction, now is not the time for Washington to impose self-inflicted wounds on the economy."
But Barack Obama's opponents said his policies were holding back further growth in the jobs market. The Republican House speaker, John Boehner, said: "There's some good news in this report, but economic growth is still tepid, the unemployment rate is far too high, and the president continues to promote policies that undermine robust job creation.
Greenhaus, chief global strategist at BTIG called the latest figures a "darn good report". In a note to investors he highlighted a 0.4% rise in average hourly earnings, "tied for the highest rate of increase during the entire recovery. Finally, yes the unemployment rate did hold steady but it did so for all the right reasons. The number of unemployed people in the economy barely budged while the number of people working rose considerably," he wrote.
On Wednesday, ADP, the payroll processor, said the private sector had added 188,000 jobs from May to June. The previous month's tally was revised down marginally from 135,000 to 134,000.
The rise was across the economy, it said. Goods-producing employment rose by 27,000 jobs in June, the largest increase in four months. Construction payrolls rose by 21,000 in June, its biggest gain since January, and manufacturers added 1,000 jobs after a two-month decline.
Mark Zandi, chief economist of Moody's Analytics, which helps compile the ADP report, said: "The job market continues to gracefully navigate through the strongly blowing fiscal headwinds. Healthcare reform does not appear to be significantly hampering job growth, at least not so far. Job gains are broad based across industries and businesses of all sizes."
CAIRO—Egypt's new leaders backtracked late Saturday from reports that opposition figure Mohamed ElBaradei had been named as the country's interim prime minister.
A spokesman for the office of the interim president said that Mr. ElBaradei, a leader of the secular groups who opposed ousted President Mohammed Morsi, hadn't been appointed prime minister. The official state news agency had earlier reported that Mr. ElBaradei would be sworn in Saturday, sparking criticism from Islamist supporters of Mr. Morsi.
The spokesman, in a late night news conference broadcast on Egyptian state television, said discussions with various political parties were still under way over who would be appointed prime minister and help lead the transition following the military-led ouster of President Morsi.When asked if opposition from the ultraconservative Salafi Nour Party had lead interim President Adly Mansour to withdraw the nomination of Mr. ElBaradei, the spokesman said no. He added that several people, including Mr. ElBaradei, were being considered for the post.The spokesman, Ahmed al-Muslimani, said the erroneous report was a result of leaks to media. The Middle East News Agency reported that Saturday Mr. ElBaradei would be sworn in as interim prime minister later in the day. The Associated Press, citing a spokesman for the National Salvation Front, a secular coalition Mr. ElBaradei heads, said he had been chosen by Mr. MansourTens of thousands of supporters of ousted Egyptian leader Mohammed Morsi continued their sit-in at Cairo's Rabia al-Adawiya Mosque on Saturday. Photo: Getty Images.Any appointment of Mr. ElBaradei would elevate him to a position in government for the first time since he entered the nation's political scene in 2010.It would also come at a time of deep discord in Egypt after the Islamist President Morsi was removed from office by the military last week following street protests that drew millions demanding he step down. On Friday, at least 30 people were killed in fierce clashes between Mr. Morsi's supporters and opponents.
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