Fear about the fate of sovereign debt in Europe and the worldwide economic malaise swamped European markets on Monday. The markets were "slammed," The Wall Street Journal said, quoting a European financial expert.

"The banking sector continues to [be] under pressure," said Manoj Ladwa, senior trader at ETX Capital, in emailed comments. "The chances of a near-term recovery remain slim as euro-zone debt concerns, structural reform and a lawsuit for allegedly mis-selling mortgage debt all weigh heavy on the sector."

Banks need to raise new capital just as U.S. officials slap them with a lawsuit over mortgage-backed securities trading, The New York Times noted. That bleak fate will likely await American traders when they return to work Tuesday morning.

U.S. equity index futures declined, though Wall Street was closed Monday for the Labor Day holiday in the United States. On Friday, the Dow Jones industrial average slid 2.2 percent after an employment report showed the United States economy added no jobs at all in August, renewing worries that the country might be heading for a recession.

The U.S. jobs data suggest that economic growth “will temporarily stall in late 2011, with at least a 40 percent risk of recession,” Holger Schmieding, chief economist at Berenberg Bank in London, wrote in a research note. He predicted the Federal Reserve would announce new measures to speed recovery when its policy board meets Sept. 20-21.

The biggest problem, The Street declared, was the lack of hiring, with unemployment helping to sap global demand. The only possible outcome might be more action from the Federal Reserve, including a possible third round of its "quantitative easing," intended to inject more money into the world financial system. "Right now the possibility has increased," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong, told The Street. "I think they have to do something. The markets are expecting QE3."

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Ted Mann