LONDON, October 27 – Recession fears sent world stocks tumbling Monday, with Tokyo at a 26-year low, Hong Kong down 12 percent and Europe nursing heavy losses despite a G7 pledge to stabilise the financial system.
Oil prices dived underneath 60 dollars per barrel, as traders estimated that a global recession would dent future energy demand, traders said.
The European single currency sank under 1.24 dollars to a two-year nadir after a downbeat survey on German business confidence pointed to a likely recession in the eurozone\’s biggest economy, analysts warned.
Markets were also shaken after the IMF unveiled rescue plans for Ukraine and Hungary, South Korea cut interest rates, Japan announced action to boost its stock market and Australia\’s central bank intervened to prop up its currency.
"Fear continues to grip global markets," said CMC Markets analyst James Hughes.
Japan\’s Nikkei index plunged 6.36 percent, striking the lowest level since October 1982, on fears that emergency steps by world governments will be too late to prevent a worldwide recession.
Hong Kong shares closed 12.7 percent down in their biggest single-day drop since 1991, as investors dumped stocks.
The fresh equities turmoil came despite a pledge by the Group of Seven major economies to cooperate to bring stability to the global financial markets.
In Europe, London dived to a five-year trough as the market continued to digest news that the British economy was on the brink of recession after negative growth in the third quarter.
In morning deals, London\’s FTSE 100 index of top shares plunged 5.62 percent to 3,665.21 points, striking a level last seen on April 1, 2003.
Paris stocks sank more than six percent and Frankfurt fell more than five percent, before both markets pulled back slightly.
German business confidence dropped to the lowest point for more than five years in October, a key survey showed, as the nation\’s economy reeled from the international financial crisis.
The monthly business climate index calculated by Munich-based economic research institute Ifo fell to 90.2 points in October from 92.9 points in the previous month, its fifth straight drop. That marked the lowest level since May 2003, when it reached 89.6 points.
"Germany is heading for a serious recession," warned Bank of America senior economist Holger Schmiedling in response to the Ifo data.
"With business confidence declining at a record pace, the economy looks set to shrink noticeably in late 2008 and early 2009."
Elsewhere, Amsterdam dipped 4.20 percent, Madrid fell 5.45 percent, Milan lost 4.38 percent and Zurich was down 4.49 percent.
Trading was suspended on the Bucharest stock exchange shortly after the open after falls of almost 13 percent for the ten most traded shares.
It was another grim day across most of Asia. Taipei stocks sank 4.65 percent while Sydney finished with a loss of 1.6 percent. Manila reeled from a 12.3 percent plunge.
"There is more pain left. The global turmoil does not appear to be resolving soon," said Atul Mehra, head of capital markets with brokerage J M Financial in Mumbai, where stocks dropped more than five percent in the morning.
Bucking the trend, the Seoul market recovered from heavy early losses to end 0.8 percent higher after South Korea\’s central bank cut its key interest rate by 75 basis points, its largest reduction yet.
The Group of Seven nations — comprising Britain, Canada, France, Germany, Italy, Japan and the United States — sought to calm nerves by affirming their "shared interest in a strong and stable international financial system."
At the same time, they voiced concern about "excessive volatility" in the value of the yen, which Friday soared to a 13-year high against the dollar as worried investors fled to the relative safety of the Japanese currency.
Japanese Prime Minister Taro Aso announced fresh measures to support the ailing stock market including a bigger government fund to pump capital into banks if needed.
In commodity markets on Monday, Brent crude oil prices plunged underneath 60 dollars per barrel, despite last week\’s announcement that the OPEC oil cartel will cut production in November.
In foreign exchange action, the euro sank as low as 1.2334 dollars on Monday — the lowest point since April 26, 2006 — owing to fears of recession and the withdrawal of funds into the dollar, dealers said.
The renewed stock market turmoil came as the International Monetary Fund moved to bail out Ukraine and Hungary which have suffered badly in the turmoil.
US and European markets suffered heavy losses on Friday, with Wall Street\’s Dow Jones index ending down 3.59 percent.
Markets expect fresh steps by global authorities this week to try to stabilise shaky markets. The US Federal Reserve is expected to cut interest rates Wednesday from the current level of 1.5 percent.