Wall Street

World stocks tumble after Wall Street decline amid concern about global weakness

BEIJING — World stocks tumbled Friday as ballooning European debt and a rise in U.S. unemployment claims added to fears the global economy could slip back into recession.

Markets from Tokyo to Hong Kong to Seoul dropped about 3 per cent or more after Wall Street was hurt by data showing U.S. unemployment claims rose last week. Wobbly government finances in several European countries also dented buying appetite.

European markets posted smaller losses in early trading Friday after suffering big falls the day before. Oil prices dropped below $73 a barrel, adding to a big slide overnight, while the dollar continued to gain against the euro and also rose against the yen.

Investors were pulling money out of riskier assets such as emerging market stocks and commodities amid concern about the fiscal health of deeply indebted Greece, Spain and Portugal and their ability to borrow more money.

"We are getting into a situation where stimulus is needed to sustain growth but governments may not be able to finance it," said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong.

"If that scenario materializes, there will be nothing to save the global economy from another recession," he said. "That risk has caused a lot of stress in markets."

As trading got underway in Europe, France's CAC-40 was off 0.7 per cent, Germany's DAX shed 0.4 per cent and Britain's FTSE 100 retreated 1.1 per cent. Futures augured more losses on Wall Street with S&P futures losing 0.4 per cent, or 4.1 points, to 1,057.70.

In Asia, Japan's benchmark Nikkei 225 sank 2.9 per cent, or 298.89 points, to 10,057.09 and China's Shanghai Composite Index fell 1.9 per cent, or 55.91, to 2,939.40. Hong Kong's Hang Seng buckled 3.3 per cent to 19,665.08.

Elsewhere, South Korea's Kospi slid 3.1 per cent to 1,567.12, Taiwan's market dived 4.3 per cent and Australia's S&P/ASX benchmark dropped 2.3 per cent.

Most Asian economies have weathered the global crisis with less damage than Western countries and debt levels are lower. But many rely heavily on exports to the United States and other developed markets.

"The importance of the U.S. and Europe is so large that if those major industrialized economies have a risk of recession, Asia cannot escape unscathed," Kowalczyk said.

In the United States Thursday, the Dow Jones industrial average closed down 268.37, or 2.6 per cent, at 10,002.18 after briefly trading below 10,000 for the first time in three months. That came after the Labor Department said claims for unemployment benefits rose by 8,000 to 480,000 last week, disappointing investors who hoped for a decrease.

Oil prices retreated in Asia with benchmark crude for March delivery down 61 cents at $72.53 a barrel in electronic trading on the New York Mercantile Exchange after losing $3.84 overnight.

In currencies, the dollar rose to 89.41 yen from 88.90 yen. The euro was lower at $1.3653 from $1.3726.