World Stocks Sink on Fresh Fears of U.S. Recession

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World stock markets plummeted Friday amid signs of a possible U.S. recession and renewed worries over the health of Europe's banks.

Oil prices fell to near $79 a barrel in Asia, extending a major sell-off fueled by investor fears that slowing global growth will undermine demand for crude. The dollar was higher against the euro but down against the yen.

European shares opened sharply lower, with Britain's FTSE 100 dropping 2 percent to 4,992.23. Germany's DAX shed 4.3 percent to 5,356.83 and France's CAC-40 sank 3.5 percent to 2,968.83. Wall Street was headed for a slide, with Dow Jones industrial futures down 1.5 percent to 10,849 and S&P 500 futures slipping 1.7 percent to 1,123.80.

Asian shares also took a beating. Japan's Nikkei 225 index dropped 2.5 percent to 8,719.24 and Hong Kong's Hang Seng slid 3.1 percent to 19,399.92.

South Korea's benchmark Kospi index was the worst performer in Asia, falling 6.2 percent to 1,744.88, its lowest close in nearly a year. The decline of 115.70 points was the Kospi's third-largest ever, but the percentage drop was far from the 12 percent record decline on Sept. 12, 2001, according to stock market operator Korea Exchange.

Investors aggressively sold South Korean exporters amid pessimism over prospects for the global economy. LG Chem Ltd., which makes batteries for electronic cars, plunged 14.7 percent. Hyundai Motor Co. dived 11 percent and Kia Motors Corp. fell 7.5 percent. Samsung Electronics Co., South Korea's biggest company, dropped a more modest 4.1 percent.

Financial markets have wrestled for several weeks with fears that a new recession in the U.S. is in the offing. The number of people filing claims for unemployment benefits rose to 408,000 last week, an increase of 9,000 from the week before. Meanwhile, a survey showed that manufacturing in the mid-Atlantic region contracted in August by the most in more than two years.

The raft of bad economic news sparked a sell-off on Wall Street on Thursday. The Dow Jones industrial average fell 3.7 percent to 10,990.58. The Standard & Poor's 500 index fell 4.5 percent to 1,140.65. The Nasdaq composite fell 5.2 percent to 2,380.43.

In Asia, energy shares were hammered amid fears that demand would dry up if the world economy throttles back. Hong Kong-listed PetroChina Ltd., the country's biggest oil and gas company, lost 4.1 percent. CNOOC, China National Offshore Oil Corp., fell 3.3 percent. Energy Resources of Australia was down 4 percent.

Mainland Chinese shares tracked losses elsewhere, with shares in coal, oil and cement leading the decline. The Shanghai Composite Index lost 1 percent to 2,534.36 after dipping almost 2 percent earlier in the day. The Shenzhen Composite Index lost 0.8 percent to 1,133.84.

European bank stocks tanked Thursday as fears mounted about their exposure to the region's spiraling debt crisis, which has dragged on for nearly two years and resulted in a string of sovereign bailouts worth hundreds of billions of euros.

Banks have also been under pressure because German Chancellor Angela Merkel and French President Nicolas Sarkozy said earlier this week that their countries were developing a plan to tax financial transactions.

Asian bank stocks followed their European counterparts lower. Hong Kong-listed Bank of China Ltd. slid 3.5 percent, while the Industrial and Commercial Bank of China, the world's biggest bank by market value, lost 3.2 percent. Commonwealth Bank of Australia Ltd., the nation's largest lender, fell 2.9 percent.

Benchmark oil for September delivery was down $2.76 to $79.64 a barrel in electronic trading on the New York Mercantile Exchange. Crude fell $5.20, or 5.9 percent, to finish at $82.38 on Thursday.

In London, Brent crude for October delivery was down $1.77 cents to $105.22 per barrel on the ICE Futures exchange.

In currencies, the euro fell to $1.4297 from $1.4319 late Thursday in New York. The dollar was down to 76.42 yen from 76.54 yen.