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Europe's debt problems hit markets

World stock markets have fallen sharply amid fresh anxiety over Europe's debt problems and a potential default by Greece that would wreak havoc on the global economy.

Nervous investors unloaded equities amid concerns that Greece would infect Europe, and headed for safer havens like bonds and the Japanese yen. The euro hit a 10-year low against the yen.

European shares plummeted in early trading. Wall Street also was headed for a sullen start to the trading week.

"Greece basically has its back against the wall," said Tom Kaan, head of equity sales at Louis Capital Markets in Hong Kong. "Having said that, the concern I have is no longer Greece. Greece has to default."

The bigger concern, he said, was whether other European countries like Italy would follow.

"We'll see still more sludge on the downside before things get better," Kaan said.

Trading in Asia was no better. The Nikkei 225 stock average in Tokyo lost 2.3% to 8,535.67 - its lowest closing level since April 2009. Japan's powerhouse export sector was hit hard amid the strength of the Japanese currency, which makes products more expensive overseas.

In Hong Kong, meanwhile, the benchmark Hang Seng index shed 4.2% to 19,030.54 as worries about Europe as well as a possible recession in the United States weighed on investors.

Benchmarks in Australia, New Zealand and Singapore also retreated. Financial markets in South Korea, mainland China and Taiwan were closed Monday for national holidays.

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