It has been another day of turmoil on Wall Street as the prospect of a global recession moved closer to reality and investors around the world responded by selling big. There were also troubling signs that the economies of Hungary, Ukraine and Belarus could go the way of Iceland.
The Dow Jones industrial average fell precipitously at the opening bell Friday, plunging more than 400 points, or 5 percent, in the first five minutes. After a volatile day of trading, the Dow closed down 312 points to 8,378, while all the major indexes fell more than 3 percent.
Britain said Friday that its economy had contracted in the third quarter, putting one of the world's key financial bulwarks on the cusp of recession. Japan's corporate flagship, Sony, lowered its earnings forecast.
The bad news sent world markets to their lowest levels in five years, with Japan's Nikkei and France's CAC40 down 10 percent and Britain's FTSE 100 down 5 percent. In Hong Kong, the Hang Seng index fell 8.3 percent to 12,618.
The gloom and doom on world markets also stacked the deck against Wall Street, as the New York Stock Exchange was forced to put halt selling ahead of the open after Dow futures fell as much as 550 points. So-called circuit breakers were also triggered for the Standard & Poor's 500 futures index and the Nasdaq 100 futures index, both of which fell more than 6 percent ahead of the open.
In Japan, Sony's shares slid more than 14 percent after it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent in morning trading after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.
Investors bet on either the dollar or the Japanese yen as safe havens, forcing the greenback to a 13-year low below 93 yen but to a two-year high against a basket of currencies and the euro. The British pound hit a six-year low.
The tailspin in world equity markets has been exacerbated by big hedge funds that have dumped holdings to raise cash.
Emerging markets took a pounding. India, Thailand, Indonesia and the Philippines saw huge sell-offs as investors sought to cut their exposure to risky assets and meet redemption needs at home.
Meanwhile, ratings agencies have downgraded a string of countries, particularly in central and Eastern Europe. The International Monetary Fund has been in discussions with Pakistan, Belarus, Serbia, Hungary, Turkey and Ukraine about possible help for their economies, which have been clobbered by capital flight.
Meanwhile, Iceland's highly indebted banking sector has all but collapsed, leaving the country dependent on the IMF or Russia for a bailout.
OPEC on Friday announced a production cut of 1.5 million barrels a day to shore up the falling price of oil, but the move had little effect amid gloom about future demand because of the global slowdown. Light sweet crude traded lower, near $63 a barrel.
One bright spot, however, came from a major source of the current woes: U.S. housing. The National Association of Realtors said Friday that sales of existing homes rose 5.5 percent in September, the largest increase in more than five years, in a possible sign that the housing slump could be starting to bottom out.