World shares in further decline

Key European markets have suffered declines in morning trading, following sharp falls in Asia and on Wall Street, reported The BBC.

By lunchtime, leading share indexes in Paris and Frankfurt were both down nearly 1%, while London's FTSE registered a more modest 0.1% fall.

Asian markets fell after the Dow Jones in New York hit a two-year low and oil hit a new high at almost $142 a barrel.

China's benchmark Shanghai index dropped by 5.3%, while India's Sensex index declined by 4.3%.

Indexes in Japan, Taiwan and South Korea all shed more than 2%.

Crude oil surged to a record, as Brent crude jumped to $141.98 a barrel, while New York light crude climbed as high as $141.71, on concerns about supply.

The fear on Wall Street, where the Dow fell more than 3%, is that rising prices and tighter finances will force Americans to curb spending and push the economy into recession.

Investors reacted to a string of bad news about several sectors of the US economy, a prime market for Asian exporters, while worries remain about the credit crunch and sub-prime fallout.

"We've still got bad news on the credit crunch, we've got bad news about consumers," said Garry Evans, pan-Asian equity strategist at HSBC in Hong Kong.

"The macro environment is not a good one and people are very risk averse."

The fall in Tokyo also came after signs that oil and commodity prices were fanning inflation and causing consumers to hold back from spending.

Meanwhile, uncertainties faced by China's economy due to the global economy and markets have increased, said Su Ning, deputy governor of the Chinese central bank.

"According to the mainstream viewpoint in the international community, the biggest part of the sub-prime-related crisis has passed, but the impact of the crisis is continuing," he said.

"There are different views on the trend of the dollar, and the rise of oil prices and their impact on the world economy. These things increase external uncertainties for China's economy."