Markets reel from recession fears

New York, London: The threat of a painful global recession pushed oil prices down, lifted the dollar and sent stock markets reeling on Wednesday, with investors unnerved by new warnings about the costs of the worldwide financial crisis.

Shortly after the open, Wall Street slumped 3.7 per cent despite massive government efforts to get credit flowing again as shares in Argentina fell 16.17 per cent.

In late afternoon trade, the London stock market was down 4.46 per cent, Paris lost 5.25 per cent and Frankfurt fell 4.27 per cent. Earlier, Tokyo nosedived 6.79 per cent and Hong Kong lost 5.2 per cent.

"The old story that has been put aside in the recent period of financial market crisis now comes back to the market's mind: recession fears," wrote Commerzbank analysts.

Spiralling stocks also sent shockwaves through currency markets as dealers priced in interest rate cuts in Europe to help fix flagging economies.

The dollar climbed to a two-year high versus the euro and a five-year high against sterling as British Prime Minister Gordon Brown delivered the latest stinging verdict on the outlook for the world's biggest economies.

"We must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too," he told parliament.