Panic on world's stock markets

Stock exchanges around the world took their biggest tumbles since the 2008 financial crisis, reacting to fears of a US recession and lack of faith in Europe’s efforts to deal with deficits.

Reuters/Issei Kato

European stock markets fell three to four per cent on Friday morning, following similar falls in Asia. On Thursday the US’s Dow Jones Industrial Average suffered its worst one-day drop since December 2008, closing 4.3 per cent lower at 11,383.68 and wiping out the gains of the entire year.

Speculation is increasing that the world economy is heading for a double-dip recession with the minimal recovery from the 2007-2008’s financial crisis being wiped out and further slump following.

The share collapse was fuelled by the US’s failure to recover significantly, with mass unemployment expected to stay at over nine per cent when new figures are announced Friday and manufacturing at a standstill, as it is in Europe and Asia, according to data released last week.

And belief that the eurozone will tackle its deficit is also collapsing, as it became clear that its third and fourth largest economies, Italy and Spain, could follow struggling Greece, Portugal and Ireland in needing an international bailout to save them from default.

“It is clear that we are no longer managing a crisis in the euro-area periphery,” European Commission chief Jose Manuel Barroso warned eurozone leaders in a letter Thursday.

The European Central Bank announced that it would resume emergency credit-easing measures but the move failed to restore confidence on Friday.