LONDON: Global stocks plunged on Friday at the rising prospect of a sharp economic downturn with attention focused on US jobs data, widely expected to deepen the gloom of flagging growth and eurozone debt.
European stock markets initially dived 3.0-4.0 percent after heavy falls in Asia and on Wall Street, as traders nervously awaited vital US employment figures for July due at 1230 GMT and wondered whether a so-called double-dip recession was in sight.
However losses were far less acute about an hour after the start of trading, while Madrid was even showing a gain after official data showed that the Spanish economy grew in the second quarter.
London's benchmark FTSE 100 index was down 1.75 percent after initial losses of 3.0 percent, which had sent it to levels last seen 11 months ago.
Frankfurt slid 1.37 percent, Paris lost 0.20 percent, Milan shed 0.47 percent, while Madrid gained 0.73 percent.
In foreign exchange deals on Friday, the dollar fell to 78.54 yen from 78.93 yen in New York, a day after Japan intervened in markets to stem the yen's rise. The euro meanwhile rose to $1.4143.
"The reality of a global economic contraction seems to have finally kicked in as the markets continue to plummet," said Manoj Ladwa, senior trader at ETX Capital in London.
"Investors are pricing in a slowdown in growth and sovereign debt problems as equities drop across the board. While US Payroll and employment numbers later today are likely to come in weak, the market does seem to have factored this in, and could recover some of its losses later in the session," he added.
Asian stock markets meanwhile closed sharply lower, as already-fragile investor confidence was hammered by more weak US economic data and a warning from the head of the European Commission that the eurozone debt crisis had spread from peripheral countries to mainstay economis such as Italy.
"It's going to be a very ugly end to an even uglier week," IG Markets analyst Ben Potter said in Sydney.
Tokyo tumbled 3.72 percent, Sydney slumped 4.0 percent and Taipei dived 5.58 percent. Fear swept across Asia from Europe and the United States, where the Dow Jones Industrial Average suffered its worst one-day drop since December 2008 to close 4.3 percent lower, erasing all this year's gains.
"We're seeing the erosion and now the loss of confidence, confidence in the economy, confidence in the market, confidence in the policy makers. It's all showing up," said US-based Hugh Johnson, of Hugh Johnson Advisors.
The latest front cover of the Economist publication meanwhile carried the headline: Time for a double dip? -- with the respeced magazine questioning whether the US would fall back into recession.
A double-dip recession refers to a short-lived recovery from one recession and then a new plunge back into economic contraction.
Analysts say that fund managers now see broadly similar, albeit it different, issues to the ones which triggered the financial crisis three years ago, now looming on the horizon.
Weak data out of the United States on Thursday fuelled these concerns.
The US Labor Department reported that weekly claims for unemployment benefits remained at a high 400,000 last week.
Those figures followed data this week showing manufacturing in the United States, Europe and Asia had come to a virtual standstill.
European Commission chief Jose Manuel Barroso urged eurozone leaders on Thursday to re-think their currency's financial defences, admitting debt contagion has now spread to the heart of the single currency area and urging a rapid revamp of new rescue systems.
"It is clear that we are no longer managing a crisis just in the euro-area periphery," Barroso warned in a letter sent to the 17 eurozone leaders.
A deal on July 21 on a second bailout for Greece worth about 160 billion euros ($226 billion) has failed to prevent sharply higher debt-risk premiums for Italy and Spain, the eurozone's third and fourth-largest economies.
His comments came as the European Central Bank announced it would resume emergency credit-easing measures, some of which were last enacted at the height of the financial crisis.
But the ECB's efforts still failed to restore confidence. The debt risk premium for Spain and Italy hit a record euro-era high Friday on growing concerns the two countries could be dragged down by the eurozone debt crisis.
The spread or difference in rate of return between Spanish 10-year government bonds and the benchmark German bond, the strongest in the eurozone, was 417 points and 416 points for Italian debt.
The eurozone debt crisis has put Italy and Spain under huge pressure in recent weeks after Greece, Ireland and Portugal had to be bailed out by the European Union and the International Monetary Fund.
Copyright AFP (Agence France-Presse), 2011
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