Across the globe, from Tokyo, Hong Kong and Shanghai, to Frankfurt, London, Paris and New York, traders' screens were awash with red.

Shortly after the open, Wall Street slumped on growing recession fears and persistent strain in the credit markets, despite massive government efforts to get credit flowing again.

'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 in a research note.

New York's Dow Jones Industrial Average dropped 3.58 per cent shortly after the open, extending a 2.50-per cent plunge on Tuesday.

In late afternoon European trade on Wednesday, the London stock market was down 4.10 per cent, Paris lost 5.22 per cent and Frankfurt fell 4.27 per cent.

Madrid stocks tumbled by more than eight per cent, Milan fell about two per cent and Zurich was down by almost four per cent.

In earlier Asian trade, Tokyo nosedived by 6.79 per cent by the close and Hong Kong lost 5.2 per cent.

'Markets are being dominated by the fears and nerves that have be dominating for the last few weeks,' added CMC Markets dealer Ian Griffiths in London.

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

In commodities, the price of New York crude oil tumbled to 67.75 dollars per barrel - the lowest point since June 2007 - on renewed worries about energy demand in the face of slowing global growth, traders said.

British Prime Minister Gordon Brown delivered the latest stinging verdict on the outlook for the world's biggest economies in a weekly questioning session in parliament on Wednesday.

'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,' Mr Brown told lawmakers.

His comments echoed those of Bank of England governor Mervyn King who warned late Tuesday that Britain was 'likely' entering a recession - which is defined as two successive quarters of negative economic growth.

The financial crisis will most probably tip the world economy into recession, economists at Swiss bank UBS forecast Wednesday, saying the United States faced four quarters of contracting output and that a recession in Europe was 'inevitable'.

'Global recession concerns are responsible for the negative disposition,' said Patrick O'Hare, analyst at Briefing.com.

'Oil prices below US$70 (S$104) per barrel, an acknowledgment from Bank of England governor (Mervyn) King that a UK recession seems likely, further job cut announcements in the US, heavy losses in foreign markets, and a litany of companies sounding a cautious view on 2009 prospects have all played a role in the market's economic concerns,' Mr O'Hare said.

Elsewhere in Asia, stocks dropped 5.1 per cent in Seoul to finish at their lowest level for three years, while Sydney ended with a 3.4 per cent loss.

Bangkok declined by 2.8 per cent, Shanghai lost 3.20 per cent and Singapore tumbled 5.19 per cent.

'Concerns about the impact of the financial crisis on the real economy are growing rapidly,' said Kazuhiro Takahashi, senior analyst at SMBC Daiwa Securities.

The turmoil spilled over into currency markets. The euro hit a near two-year low against the dollar and the British pound plunged to a five-year trough on speculation of further European interest rate cuts to spur economic growth.

Markets fell despite an offer by the US Federal Reserve to supply up to US$540 billion of help to money market mutual funds in its latest response to the credit crunch.

The market for these assets, which in normal times are considered safe investments offering modest returns, has frozen up in recent weeks as the global financial crisis worsened.

But while credit markets have showed signs of a thaw recently, analysts warned that companies will still find it harder to gain access to credit, while the outlook for their profits is also growing bleaker.

The Tokyo market was meanwhile spooked by media reports that auto giant Toyota Motor and megabank Mitsubishi UFJ are likely to suffer sharp falls in earnings. -- AFP