A global equities sell-off gathered speed on Friday as nervous investors were hit by growing US recession fears, a plunging dollar and record oil prices, dealers said.
European markets fell after sharp losses earlier in Asia and overnight on Wall Street following more bad news on the US subprime home loan crisis.
Tokyo sank 3.3 per cent to a six-week low, Australian shares shed 3.2 per cent and Hong Kong was off 3.6 per cent, as investors dumped shares after a string of gloomy reports about the global credit crunch sparked by the collapse of the US housing market.
In midday European trade, London was down 1.25 per cent, Frankfurt dropped 1.44 per cent and Paris shed 1.47 per cent.
"The story hasn't changed; it is still concerns around the subprime fallout and in particular concerns about the US recessionary situation," said Hargreaves Lansdown analyst Richard Hunter.
"US economists have been debating for some time whether they are travelling towards a recession or whether they have already arrived.
"Within the last few days, that consensus might have just tipped towards the fact that they are in a recessionary situation, which has implications for the global economy."
On the foreign exchange market on Friday, the euro rocketed to a record high $1.5431 (Dh5.66). Investors fear that the soaring European single currency makes eurozone exports onto international markets less competitive.
At the same time, oil prices are hitting record highs close to $106 (Dh389) per barrel, boosted by the weak dollar and tight energy supplies. That ramps up companies' costs and eats into profits.
"There's really nowhere to hide in this market," said Marcus Droga, an advisor at Macquarie Private Wealth in Sydney. "All sectors are down."
Markets took their cue from Wall Street, which tumbled overnight as Thornburg Mortgage and a bond fund from the Carlyle Group became the latest to reveal problems with US mortgage-related investments.
The bad news deepened when the US Federal Reserve announced that debt of American households had exceeded equity for the first time since the Fed began tracking the figures in 1945.
Meanwhile the Mortgage Bankers Association reported that US home foreclosures hit a record level in the fourth quarter and that those numbers were likely to keep rising.
"The market is in shock due to Wall Street's overnight slide, putting most investors on the defensive," said Lee Young-Kon, a Hanwha Securities analyst in South Korea, where the market lost 2.0 percent.
Adding fuel to the fire were concerns about the impact that stronger Asian currencies would have on the region's export competitiveness.
The dollar has flirted with a three-year low against the Japanese yen, which investors were looking to in the face of the stream of bad news coming out of America.
Later on Friday, investors will have to contend with a crucial US employment report which could spell fresh gloom for the world's biggest economy, analysts said.
The February jobs report could show the weakening US housing market and months-long credit crunch having more impact on the labour market, leaving investors with few signs of any good news that could spur a rebound.
The Wall Street consensus was for a gain of 25,000 jobs but some analysts have predicted a second consecutive loss after a private sector report said US firms shed 23,000 jobs last month. (AFP)
World stock markets slide on US recession worries