London: Heightened anxiety that the eurozone could slump into another recession sent European equities reeling Friday to levels unseen for a year.
London`s benchmark FTSE 100 index dropped 1.43 percent to 6,339.97 points and Frankfurt`s DAX index tumbled 2.4 percent to 8,788.81 points to close at year lows.
Meanwhile in Paris the CAC 40 shed 1.64 percent to 4,073.71 points, its lowest level in 2014.
Madrid lost 1.20 percent and Milan fell 0.94 percent.
The euro dropped to $1.2630 from $1.2691 late on Thursday in New York, while global oil prices came under further pressure from weakening demand growth for crude against a backdrop of a solid supply situation.
"It now looks as though investors are nervous about a confluence of factors ranging from worries of a global economic slowdown, an economic crisis with German economic data especially poor, deflation, an unwillingness on the part of German policymakers to adopt fiscal reflation, the impact of Ebola and lurking geopolitical risks," said Neil MacKinnon, economist at VTB Capital financial group.
The slump in Europe on Friday followed a similar one in Asia and a broad two percent sell-off on Wall Street on Thursday as the weak economic data from Germany heightened concerns about poor overseas growth.
European stock markets had already closed mostly down on Thursday after a cut in the growth forecasts of Germany and following a fresh IMF warning on recession.
International Monetary Fund chief Christine Lagarde said there was a 35-40 percent chance of the eurozone slipping back into recession if action was not taken.
In Asia on Friday Tokyo tumbled 1.15 percent, Sydney shed 2.05 percent and Seoul slipped 1.24 percent.
Hong Kong shed 1.90 percent and Shanghai eased 0.62 percent.
US stocks moved even lower on Friday as the negative sentiment from Thursday`s rout carried over, with the Dow Jones Industrial Average slipping 0.08 percent to 16,646.21 points in midday trading.
The broad-based S&P 500 eased 0.25 percent to 1,923.38, while the tech-rich Nasdaq Composite Index fell 1.21 percent to 4,325.55.
"Whether traders can see fit to shake off this moribund sentiment remains to be seen, but this line about Germany slipping into recession is simply layering on another level of angst to a market that is already wary of the threat posed by the likes of Ebola in West Africa and Islamic State in the Middle East," said Tony Cross, market analyst at traders Trustnet Direct.
In the currency markets, the dollar continued its climb against the euro. It had paused this week on signs the US Federal Reserve was worried about the greenback`s 10 percent gain over the past five months, which could yet hurt the US recovery and thereby hold back a rise in interest rates.
"Just when the dollar looked as if it was going to roll-over for a breather, better than expected claims data came along, together with further pledges from ECB President Draghi to expand stimulus measures should conditions warrant," said Simon Smith, chief economist at FxPro.
News on Thursday that US jobless claims have fallen to an 8-year low helped reassure investors on the strength of the US recovery, and Draghi`s comments reinforced the belief that the ECB will be expanding its easy money policies.
While the weaker euro will eventually be good for European exports, it it is hurting equities.
"The weaker euro versus the US dollar in combination with bigger percentage falls in European indices has seen the flow of funds is decidedly out of Europe and back to the US," said analyst Jasper Lawler at CMC Markets UK.
He said data showed that this week had seen the biggest weekly US outflow from European stocks in two months and total European assets held by US funds has dropped by a fifth in the past four months to $40 billion.
The euro meanwhile edged up to 78.77 British pence from 78.73 pence on Thursday, while the pound fell to $1.6034 from $1.6118.
The price of gold fell to $1,219 an ounce on the London Bullion Market from $1,226.75 on Thursday.
Meanwhile in the oil markets, Brent dived to a four-year low point of $88.11 a barrel in Asian trading hours, extending this week`s sharp falls on global economic fears and plentiful crude supplies, analysts said.
US benchmark West Texas Intermediate (WTI) for November delivery sank to $83.59, a point last witnessed on July 3, 2012, in London trading.
