Volkswacht Bodensee - Ugly day for global stocks across Wall Street, Europe, Nikkei

Following a decisive down day in Europe, all three major US indices spent the entire day in the red, with the Dow Jones Industrial Average losing 2.6 percent, or more than 1,000 points, to finish at 38,703.27.

The losses followed down days last Thursday and Friday on the heels of poor US employment data and a negative survey from manufacturers that sparked worries about a recession.

Seizing on that point, some market watchers have called for the Federal Reserve to cut interest rates -- perhaps even in an emergency meeting -- after the central bank kept rates unchanged last week.

But market watchers are also focusing on the ripple effects of Japan's decision last week to hike interest rates, which boosted the yen and slammed Japan's Nikkei equity market, which dove 12.4 percent.

"It's an abrupt move in a market that has a lot of tentacles," Art Hogan of B. Riley Wealth said of the Japan currency shift, which is believed to have led to speedy liquidations in other markets.

Hogan believes the Japan currency movements are much more a factor in the turbulence than recession fears.

Monday's drop in Tokyo's Nikkei was the worst since the Fukushima crisis in 2011. The index also suffered its biggest ever points loss, shedding 4,451.28.

The Bank of Japan last week raised interest rates for the second time in 17 years, with talk of another rate hike to come, while the US Federal Reserve has hinted at a cut as soon as September.

"Investor sentiment was down as the US employment data for July came in lower than expected, raising fears that the US economy is slowing more than expected," IwaiCosmo Securities said.

- Recession? -

Friday's much-anticipated report showed the US economy added just 114,000 jobs last month, well down from June and far fewer than expected, with unemployment at 4.3 percent.

Some analysts pointed to the "Sahm Rule," which says an economy is in the early stages of recession if the three-month moving average of unemployment is 0.5 percentage points above its low over the previous 12 months. That was triggered by Friday's data.

But Chicago Federal Reserve President Austan Goolsbee said on CNBC that US jobs numbers are "not looking yet like recession" but said if conditions deteriorate "we're going to fix it."

Survey results of US services companies by the Institute for Supply Management showed stronger than expected growth, boosting US Treasury bond yields.

Analysts at High Frequency Economics called the report "a refreshingly stronger-than-expected outcome" that helps to counter the gloom from last week's economic data.

"Whether it will turn around the US equity sell-off is to be determined, of course," it added.

Some market watchers think stocks could be in for more bumpiness in August, but that such volatility does not portend a recession.

CFRA Research "continues to foresee a soft landing, rather than a new recession," said a note from chief investment strategist Sam Stovall that pointed out that August is historically a weak period for stocks.

- Key figures around 2050 GMT -

New York - Dow: DOWN 2.6 percent at 38,703.27 (close)

New York - S&P 500: DOWN 3.0 percent at 5,186.33 (close)

New York - Nasdaq Composite: DOWN 3.4 percent at 16,200.08 (close)

London - FTSE 100: DOWN 2.0 percent at 8,008.23 (close)

Paris - CAC 40: DOWN 1.4 percent at 7,148.99 (close)

Frankfurt - DAX: DOWN 1.8 percent at 17,339.00 (close)

EURO STOXX 50: DOWN 1.5 percent at 4,571.60 (close)

Tokyo - Nikkei 225: DOWN 12.4 percent at 31,458.42 (close)

Hong Kong - Hang Seng Index: DOWN 1.5 percent at 16,698.36 (close)

Shanghai - Composite: DOWN 1.5 percent at 2,860.70 (close)

Dollar/yen: DOWN at 144.05 yen from 146.53 yen on Friday

Euro/dollar: UP at $1.0959 from $1.0911

Pound/dollar: DOWN at $1.2773 from $1.2801

Euro/pound: UP at 85.77 pence from 85.23 pence

Brent North Sea Crude: DOWN 0.7 percent at $76.30 per barrel

West Texas Intermediate: DOWN 0.8 percent at $72.94 per barrel

burs-jmb/bgs

S.Gantenbein--VB