Oct 10, 2008, 15:06 GMT
Frankfurt - European shares plummeted Friday as investors dumped shares on Wall Street amid fears the credit squeeze could trigger a prolonged global recession.
With New York's losses quickly gaining momentum following its opening on Friday, Europe's benchmark blue-chip Stoxx 50 index plunged by 10 per cent to 2066 points.
The panic selling snowballed across Europe with shares in Frankfurt and Paris spiralling down by about 12 per cent following Wall Street's opening.
After a horror week on world bourses, the markets' focus is now on this weekend's meeting in Washington of Group of Seven finance ministers and central bankers to help shore investor confidence through coordinated action aimed at freeing credit markets.
'We are going through a systemic shock in which risk propagates itself through the entire financial system like a virus,' said Benoit Debroissia, market analyst at Richelieu Finance in Paris.
Amid fears of a stock market crash, stock exchange authorities in Moscow announced that they were delaying the opening of trading.
'Russia risk is a fringe luxury that most global investors will avoid for now,' wrote Chris Weafer, chief strategist at UralSib in a note to investors.
'Investors will not return to the markets until the price of oil finds some floor, ie it stops falling, and the US equity market stops behaving as if tied to a theme park ride - one of the scary ones,' he said.
Meanwhile, the Vienna Stock Market temporarily suspended trading shortly after opening Friday in the wake of a 10-per-cent fall in shares.
The Bucharest Stock Exchange also halted regular trading Friday for the second time this week as the massive global sell-off hit eastern Europe's fastest-growing economy.
Indeed, the selloff also swept across Central European bourses, with the Prague Stock Exchange's main PX Index down 10.3 per cent in late morning trading, after plummeting by more than 13 per cent in opening trading.
'Trading will remain hectic unless some significant news comes in,' warned Patria Online chief broker Roman Kodera in Prague.
Banking and financial stocks were among the biggest losers across Europe, with Britain's biggest mortgage lender HBOS dropping by more than 20 per cent in early trade. This came just two days after the British government announced a major bail-out package.
Italy's two largest banks, Intesa SanPaolo and UniCredit also lost more than 12 per cent, while Spain's two leading banks Santander and Banco Bilbao Vizcaya Argentaria (BBVA) were off about 8 per cent.
Europe's biggest insurer, Allianz, at one point lost more than 13 per cent.
To be sure, there was little refuge for investors from Friday's stock market bloodbath with shares in European corporate giants, such as drugmaker Bayer and energy groups E.ON and Iberdrola also badly hit by the sell off. Spain's big telecoms group Telefonica plunged by 9.16 per cent.
Banks and industrials led the sell-off in Paris, with Societe Generale and French-American telecommunications equipment producer Alcatel Lucent down by nearly 19 per cent.
The steep share falls across Europe came in the wake of mass selling in Asia with Japanese stocks dropping below the psychologically important 9,000-point mark for the first time in more than five years with the Nikkei finishing the week down 24.33 per cent.
The Bank of Japan also injected a record 4.5 trillion yen (44.8 billion dollars) into the money markets Friday in a fresh bid to shore up confidence in the financial system.
The deepening sense of concern about the economic outlook drove up the price of gold, a traditional investment safe haven, by 3.4 per cent in midday European trading and sent the oil price down by almost 5 per cent to 82.42 dollars.
The gloomy prospects for commodities also led Australian stocks to drop 8.3 per cent, with the nation's stock market smashing through the psychologically important 4,000 barrier mid-session.
While the Indonesian Stock Exchange suspended trading in its morning session Friday for the second consecutive trading day, Hong Kong stocks plunged by 8 per cent.
Shanghai's benchmark composite index ended the day down 3.81 per cent.
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