US data blitz points to slowing economic momentum

Stock markets tumbled on Wall Street as a blitz of data fuelled fears that the world's largest economy is losing momentum.

America's jobs and housing markets both provided weaker-than-expected reports, but it was a manufacturing index from the Federal Reserve Bank of Philadelphia that injected a note of alarm into markets.

The index, which measures manufacturing activity in the states around Philadelphia, slumped to its lowest level since last August. Although the index is volatile, it has proved an accurate forecaster of how manufacturing across the country is faring.

"If that [weakness] spreads to the national indices people are going to be drastically more worried than they are right now," said David Semmens, an economist at Standard Chartered. Federal Reserve chairman Ben Bernanke underlined this week that he is focused on the state of the employment market, which will have given him little cheer yesterday.

The number of Americans making new claims for weekly unemployment benefits jumped 2,000 to 387,000, according to the Labour Department. That, in turn, propelled the four-week average for weekly claims to its highest level since December.

Having resisted calls for a fresh round of quantitative easing at their meeting this week, the rate setters at the Federal Reserve will come under mounting pressure to do so when they next gather in August if the picture deteriorates further.

The Dow Jones Industrial Average fell 1.2pc to 12,667.20 and the S&P was down 1.4pc to 1,337.24 in early afternoon trading in New York.