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Fears send markets into freefall

Financial markets are in turmoil after a collapse in share prices around the world.

Fears that the the world economy could slip back into recession led London's benchmark FTSE 100 Index to lose £50 billion of its value - its biggest fall of the year.

Asian stock markets plummeted on Friday as investors sold riskier assets amid fears the US is heading back into recession and Europe's debt crisis is worsening.

Japan's Nikkei 225 stock average slid 3.4% to 9,328.74 and Hong Kong's Hang Seng dropped 4.4 % to 20,912.60. South Korea's Kospi index shed 3.6 % to 1,945 and Taiwan's benchmark slumped 4.4 % to 7,952.98. Australia's benchmark dropped 4% to 4,103.10.

The slump in the Far East came after the US stock market on Thursday night suffered one of its worst days ever, with the Dow Jones Index plummeting 4.3%.

The plunge in share prices came amid rising fears that Italy and Spain, the eurozone's third and fourth largest economies, may need bailouts and widespread worries over the US' economic recovery.

Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said markets could continue to fall on Friday, particularly if closely-watched jobs data from the US reveals a further slowdown in the economy.

He said: "Investors are pessimistic at the moment, the general market mood is to try to prepare for the worst. It's difficult to see anything positive coming from the data today unless they reveal absolutely barnstorming figures."

Worried traders are waiting for Friday's release of US unemployment figures for July, which is expected to show weak job growth and a rise in the unemployment rate.

The plunge in global markets is further bad news for Chancellor George Osborne, who has faced increasing pressure over the pace of Britain's economic recovery. Robert Chote, chairman of the Office for Budget Responsibility, on Friday said the watchdog's growth forecast of 1.7% - made in March - was likely to be missed.

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