Recession fears hit stock markets

World shares have fallen amid concerns that the world economy will enter a protracted downturn.

The US Dow Jones index Industrial Average fell 2.3% in early trade while the wider S&P 500 Index shed 3%.

London's FTSE 100, the Paris-based Cac and Frankfurt's Dax were all down more than 3% in afternoon trade. Earlier, Asian shares had fallen sharply.

Concerns over a sharp slowdown in US factory activity added to worries about the strength of the economy.

US slowdown

A business survey from the Philadelphia Federal Reserve showed that factory activity covering the key areas of eastern Pennsylvania, southern New Jersey and Delaware fell by more than forecast in November.

The index, which is seen as a key gauge of the future state of US manufacturing, slipped to minus 39.3 from minus 37.5 in October.

And new claims for unemployment benefits leapt last week to their highest in 16 years, according to the US Labor Department.

"The unemployment data was yet another ugly data point in a seemingly never ending stream of poor economic numbers," said Michael Wittner, global head of oil research at Societe Generale.

The White House indicated on Thursday that US President George W Bush would approve legislation to increase unemployment benefits.

On Wednesday, the Dow Jones index fell back 5% to below the 8,000 mark after the US central bank cut its economic growth forecasts for 2009.

In Asia on Thursday, Japan's Nikkei index ended 6.8% lower and Hong Kong's main index fell more than 4%.

Mounting problems

The deepening global recession is being felt in a number of ways:

• Mining shares have been hit hard on fears that demand for steel and other raw materials will be hit as the economy slows. Steel giant Arcelor-Mittal lost 8% and Vedanta Resources lost 8.5%
• Oil shares were among the main fallers with BP, Royal Dutch Shell and Total all at least 5% lower as sweet crude oil fell below $50 a barrel.
• Japan's exports to Asia dropped in October for the first time in six years
• Job losses are mounting worldwide, with aerospace firm Rolls Royce, AstraZeneca and French carmaker Peugeot Citroen announcing a total of 6,100 cuts
• China has warned its employment outlook is "grim", amid worries that economic problems could lead to social unrest
• Switzerland has cut its key interest rate to 1% in a surprise move.
• The IMF has approved a $2.1bn (£1.4bn) loan for Iceland. Turkey is set to agree to a precautionary stand-by deal with the IMF soon