World stocks plunged on Thursday as fears Greece's debt crisis will spread to other European countries and undermine the global recovery continued to rattle markets.
Investors are questioning whether a $142 billion aid package for Greece will be adequate to keep debt problems from engulfing other European nations with weak government finances. The death of three people on Wednesday in an Athens bank during a 100,000-strong protest against government austerity measures has further shaken confidence in the markets.
In early trading in Europe, the FTSE 100 index of leading British shares was down 0.5 per cent while France's CAC-40 dropped 1 per cent and Germany's DAX slipped 0.4 per cent. Stock futures pointed to modest losses on Thursday on Wall Street.
In Asia, Japan's Nikkei 225 stock average dived 3.3 per cent to 10,695.69 for its biggest one-day fall in over a year while China's Shanghai benchmark sank 4.1 per cent. Japanese markets were closed Monday through Wednesday for holidays.
South Korea's Kospi was off 2 per cent, Hong Kong's Hang Seng retreated 1.5 per cent, Australia's benchmark lost 2.2 per cent and Indonesia sank 3.3 per cent in a regionwide rout. Benchmarks in Singapore, Taiwan, India, Malaysia and Thailand also slid. Analysts said some European countries may have to cut government spending to calm jittery markets, which could undermine economic growth and demand for exports.
"On any further deterioration in this situation, emerging markets will be hit via rising risk aversion, weaker trade flows and falling commodity prices," Citigroup said in a report. A drop in the euro and a rise in the dollar has also battered markets around the world. The stronger dollar hurts U.S. stocks by cutting into profits of U.S. companies that do business abroad. A higher dollar also hurts commodity prices by reducing demand from foreign buyers.
The weaker euro hurt Japanese companies who do significant business in Europe. Canon Inc. was down 3.3 per cent, and rival camera maker Nikon Corp. fell 3.1 per cent.
Financial issues declined across Asia, with Japan's Sumitomo Mitsui Financial Group Inc. down 4.3 per cent and South Korea's KB Financial Group Inc. tumbling 4.6 per cent.
Overnight on Wall Street, the Dow Jones industrials fell 0.6 per cent to 10,866.83.
The euro fell to $1.2778 from $1.2823 late Wednesday. The dollar fell to 93.55 yen from 93.89 yen.
Oil prices were up slightly after tumbling the day before. Benchmark crude for June delivery fell 50 cents to $79.47 in electronic trading on the New York Mercantile Exchange. The contract lost $2.77 to settle at $79.97 a barrel on Wednesday.