Asia, Europe markets sink after Wall Street plunge

Disappointing reports on U.S. retail sales and jobless claims overnight undercut hopes for a late-year recovery in the world's biggest economy, a critical export market.

No Asian market was spared from the carnage, which began as soon as trading opened and continued throughout the day.

In Japan, the benchmark Nikkei 225 index sank 2.75 percent at 12,212.23. Hong Kong's Hang Seng index tumbled 2.24 percent to 19,933.28, dropping below 20,000 for the first time in more than a year.

Markets in mainland China, India, Australia and Singapore were also down sharply.

In morning trading in Europe, Britain's FTSE 100 plunged 1.73 percent to 5,269.10, Germany's DAX fell 1.72 percent to 6,171.28, and France's CAC 40 lost 1.62 percent to 4,234.26.

Mark Matthews, chief Asia strategist at Merrill Lynch, said emerging markets in Asia and other regions have been hit hard lately as investors withdrew funds and faith in the global economy withered.

"People want to be confidant that the economy of the world can get better, and right now they don't have that confidence," Matthews said. "They think the global economy is still going to get worse," he added.

Pessimism permeated markets as they nervously awaited the August U.S. employment report later Friday. News Thursday from major U.S. retailers that shoppers curtailed their spending last month helped send the Dow Jones industrial average down 344.65 points, or 2.99 percent, to 11,188.23.

"It was ugly in the States; many are still taking their leads from the U.S.," said Lorraine Tan, director at Standard & Poor's equity research in Singapore. "And there's just an overall concern with global growth."

Investors bracing for weak U.S. jobs figures fueled selling in Japan, said Masaru Ohnishi, equity strategist at JP Morgan Securities in Tokyo.

But because markets have already fallen so sharply, they are "likely to rebound if results are good," he said.

A drop in the dollar against the yen overnight contributed to the malaise, pummeling major Japanese exporters. A weaker dollar reduces the value of overseas profits when repatriated to Japan. The dollar fell to 106.87 yen Friday afternoon in Asia; on Thursday in Tokyo it was trading above 108 yen. The euro was trading at $1.4242 from $1.4258.