Global markets in downward spiral

World stock markets plummeted today amid signs of a possible US recession and renewed worries over the health of Europe’s banks.

Oil prices fell to nearly $79 a barrel in Asia, extending a major sell-off fuelled 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% to 4,992.23.

Germany’s DAX shed 4.3% to 5,356.83 and France’s CAC-40 sank 3.5% to 2,968.83. Wall Street is also heading for a slide, with Dow Jones industrial futures down 1.5% to 10,849 and S&P 500 futures slipping 1.7% to 1,123.80.

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

South Korea’s benchmark Kospi index was the worst performer in Asia, falling 6.2% 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% record decline on September 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, which makes batteries for electronic cars, plunged 14.7%. Hyundai dived 11% and Kia Motors fell 7.5%. Samsung, South Korea’s biggest company, dropped a more modest 4.1%.

Financial markets have for several weeks been battling fears that a new recession in the US 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.