World markets drop on renewed US economy concerns

World financial markets are in turmoil again as global recession fears were re-ignited and sent stocks tumbling in North America and Europe.

The Dow Jones Industrial Average ended down 419.63 points, or 3.7%, to 10,990.58. The S&P 500 index dropped 4.5% to 1140.65, while the Nasdaq Composite plunged 5.2%, to 2380.43.

Investors piled into gold, which jumped to a new record of $US1818.90 an ounce.

Investment bank Morgan Stanley overnight issues a scathing report on the strength of the US and Europe, causing the Dow Jones to drop nearly 4%.

The report lowered the bank's outlook for global growth, saying the US and Euro-zone economies are "dangerously close to recession." Morgan Stanley cut its 2011 global growth estimate to 3.9% from 4.2%, and its 2012 forecast to 3.8%  from 4.5%.

The heaviest selling came in energy and materials stocks, as commodities prices sank. Bank stocks were also under significant pressure.

Hewlett-Packard briefly reversed its morning slump after reports it will spin off its personal-computer business and is close to a $US10 billion deal to acquire UK software firm Autonomy.

In Canada, Toronto’s benchmark S&P/TSX Composite Index sank 392.90 points, or 3.1%, to close at 12,186.70.

The Wall Street skid came after sharp losses in European and Asian markets. The Stoxx Europe 600 slumped 4.8% to 226.70, its biggest percentager drop since March 2009. Germany's DAX plunged 5.8% to 5602.80.

Asian bourses also fell; Japan's Nikkei Stock Index ended down 1.3%, to a five-month low, while China's Shanghai Composite declined 1.6%.

Thursday's losses extended the equity slide that kicked off in late July when investors started to exit risky assets.

In London, the FTSE 100 closed down 4.49% at 5092.23 and in Paris the CAC 40 plunged 5.48% to 3076.04.

The slump spread across other European markets, with Milan losing more than 6% and Madrid off 4.70%.

Banks bore the brunt of the selloff, as investors became increasingly concerned as to how they will fund themselves if the markets enter another recession.

The Nikkei Stock Average fell 1.3% to 8943.76, its lowest finish since March 15.

Korea's Kospi snapped out of a two-day winning streak to close down 1.7% at 1860.58, Australia's S&P/ASX 200 index lost 1.2% to 4251.20 and Taiwan's Taiex dropped 1.6%. to 7614.97.

Hong Kong's Hang Seng Index shed 1.3% to to 20,016.27, while China's Shanghai Composite declined 1.6% to 2559.47. India's Sensex fell 2.2% to 16,469.79, down more than 20% from November's high.

Currencies: Swiss franc rise continues
The Swiss franc extended gains against the euro and US dollar after the Swiss National Bank came out with a plan to stymie the franc's rise that failed to satisfy investors who were expecting more aggressive measures.

The euro plunged as low as 1.1224 francs as the SNB said it would increase its liquidity measures by 80 billion francs ($US100.5 billion) to 200 billion francs. But the central bank didn't peg the franc to the euro as many market participants were expecting.

The franc gave back some of its gains in U.S. hours, trading at 1.1404 francs versus the euro late on Wednesday. The euro was at $US1.4434 from $US1.4408. The dollar was at ¥76.51 from ¥76.81, while the euro was at ¥110.42 from ¥111.

The UK pound fetched $US1.6549 from $US1.6456.