London: Global stock markets plunged on Friday as deepening concerns over the euro pushed the currency to 18-month lows.

Dealers said sentiment turned sharply in the afternoon as US markets opened weaker despite solid economic data, with early losses snowballing in Europe as hopes that the euro zone will sort out its debt nightmare faded.

Investor fears of a euro zone default were stoked after Paul Volcker, a special adviser to President Barack Obama and a former Federal Reserve chairman, reportedly warned of the "potential disintegration" of the euro.

Reports in Spain that French President Nicolas Sarkozy had threatened to pull France out of the euro to force Germany to help Greece with its debt crisis added to the nervousness.

Nerves were jangled too after Japan said Group of Seven finance ministers discussed by phone yesterday the Greek debt crisis and the plunging euro.

The rout came after the EU-IMF agreed Monday on a rescue package for the euro zone which initially calmed markets but confidence in a resolution steadily eroded through the week.

In London, the benchmark FTSE 100 index closed down 3.14 per cent. In Paris, the CAC 40 plunged 4.59 per cent and in Frankfurt the DAX tumbled 3.12 per cent.

Madrid, Milan, Lisbon — all seen as weaker euro zone members left vulnerable in the fallout from the Greek debt crisis — were more badly hit, with Spanish stocks down six percent.

On Wall Street, the blue-chip Dow Jones Industrial Average slumped 1.68 per cent at around 15.45 GMT.

The euro dived to $1.2359 at around 15.20 GMT.

Asian markets were also dragged lower with Tokyo falling 1.49 per cent.

Gold at record high as investors seek safety

Gold rose to a record in London and New York as investors bought the precious metal as an alternative to holding currencies amid Europe's debt crisis.

Gold prices are set for a 10th annual gain, the longest winning streak since at least 1920. Gold for immediate delivery climbed $16.70, or 1.4 per cent, to $1,249.40 an ounce and traded at $1,245.82 at 12:18pm in London. The metal was up 3.1 per cent last week.