In the latest sign the economy of the world’s top consumer was still struggling, data on Thursday showed U.S. employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high. Euro zone unemployment climbed to a 10-year high.

Oil prices and stocks around the world tumbled on Monday after a jump in troubled loans at Bank of America and renewed signs of economic weakness cooled investors’ optimism the worst of a global slowdown was over.

The U.S dollar rallied broadly to trade at one-month highs as the slide in worldwide equity markets boosted safe-haven demand for the greenback, U.S. and European government debt and gold.

Bank of America stock shed 17 percent after reporting its purchase of Merrill Lynch & Co helped to more than double first-quarter profit, but credit quality deteriorated sharply, hurt by a flagging economy and growing unemployment.

Also weighing on sentiment was a key gauge of future economic activity, which fell for the third month in a row in March, showing the U.S. recession may persist through summer.

In another sign of weakness, Germany fell deeper into recession in the first quarter, the Bundesbank said, fueling expectations of a record contraction in gross domestic product.

Most major European and U.S. stock indexes fell more than 3.0 percent as analysts questioned the prospect for corporate earnings.

Shares of Citigroup Inc fell 16 percent after Goldman Sachs said credit losses at the bank continued to grow at a rapid rate, putting a damper on earnings expectations.

“People are starting to peel the results back and say wait a second,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “Can (the results) continue in the next quarter?”

At 1 p.m., the Dow Jones industrial average was off 219.04 points, or 2.69 percent, at 7,912.29. The Standard & Poor’s 500 Index was down 28.93 points, or 3.33 percent, at 840.67. The Nasdaq Composite Index was down 54.10 points, or 3.23 percent, at 1,618.97.

Banking shares took the most points off an index of leading European companies, sparked by Bank of America results.

The FTSEurofirst 300 index of top European shares closed 3.5 percent lower at 786.12 points, the biggest daily percentage drop since March 30.

Deutsche Bank lost 8.6 percent, Barclays fell 7.9 percent and BNP Paribas 6.6 percent.

The DJ STOXX Banks Index fell 5.5 percent.

Oil slid more than 8.0 percent to about $46 a barrel, depressed by a rising dollar and growing caution about the pace of any economic recovery and its impact on oil demand.

U.S. crude for May delivery was down $3.95 at $46.38 a barrel. Brent crude for June fell $3.09 to $50.26.

President Barack Obama said on Sunday the U.S. economy remained under strain and his top economic adviser tempered hopes for a speedy recovery that have driven Wall Street to six straight weeks of gains.

Managing Director Dominique Strauss-Kahn of the International Monetary Fund was quoted Sunday as saying the IMF would cut its global economic forecasts this week and that he did not expect a recovery to start unitl the first half of next year.

“Near term, we don’t see any supportive factors for the oil market,” said Harry Tchilinguirian, oil analyst at BNP Paribas in London. “We have not yet turned the corner on the economy, oil demand is very weak and inventories are high.”

The U.S. dollar rallied, boosted by volatility in global equity markets and expectations the U.S. economy will rebound from recession sooner than other regions.

“There’s no doubt among investors that the U.S. will be the first to get out of this recession,” said Matt Esteve, a currency trader at Tempus Consulting in Washington. “As stocks around the globe move lower, we are seeing a re-emergence of risk aversion and the dollar gets a boost.”

The dollar rose against a basket of major currencies, with the U.S. Dollar Index up 0.82 percent at 86.604. Against the yen, the dollar fell 1.20 percent at 97.94.

The euro fell 0.83 percent at $1.293.

Gold rose about 2.0 percent, with spot gold prices rose $17.25 to $885.15 an ounce.

U.S. and euro zone government bonds rallied as a steep fall in equities helped underpin appetite for less risky fixed-income assets.

Fears about the financial sector were also stoked by a blog which said it had obtained the results of “stress tests” on the health of the top 19 U.S. banks. A spokesman said the U.S. Treasury Department has not received results.

“It’s a pure risk aversion type day today … it’s all about the bond market reacting to very weak equities,” said John Davies, fixed-income strategist at West LB.

The benchmark 10-year U.S. Treasury note rose 26/32 in price to yield 2.86 percent. The 2-year U.S. Treasury note rose 3/32 to yield 0.93 percent.

Asian stocks edged higher. The MSCI index of Asia-Pacific shares outside Japan was up 0.7 percent and Japan’s Nikkei average drifted up 0.2 percent.

April 20 (Reuters)

Will it be a V-shaped recession – short, shallow and followed by a rapid return to normal rates of growth? Will it be U-shaped, in which the initial downturn is followed by a protracted period of weak growth and a slow return to the trend rate? Or could it even be an L-shaped recession – with economic weakness lasting for many years, as in the US during the Great Depression or Japan in the 1990s?

“The newspaper headlines may be negative, but sentiment is not,” says Bill Bonner in The Daily Reckoning.

“Most people think this is a good time to buy a house — meaning, they still think ‘you can’t go wrong in property.’ And stocks at 20 times earnings are no bargains. At real bottoms, you can buy stocks at 5 to 8 times earnings.

“At real bottoms, people have stopped looking for bottoms. Our old friend Marc Faber sent a convenient list of quotations from the crash of ‘29. A chart of the market action looks like a mountainside, with ledges…followed by more sharp downturns. But on each ledge…at each pause on the way down…there was some notable figure telling the world that it was over.

“We ain’t seen nothing yet. When we get a real bottom, they won’t be talking at all – they will have lost interest. That’s what happens. When we get a real bottom, people won’t be interested in buying stocks; they’ll come to regard stocks as a rich man’s game. And they will once again view houses as a consumer item, not an asset class. As for depression…they won’t need the newspapers to tell them how bad things are.

“We think that day is coming. How far out it is, we don’t know. As we often say, we don’t have a crystal ball.”