Crisis hammers stocks and currencies

By Burton Frierson

NEW YORK (Reuters) - Stock markets tumbled around the world on Friday as investors fearing a long and deep worldwide recession dumped risky assets far and wide, sending currencies into a tailspin and oil down sharply.

U.S. stocks slumped more than 3 percent, European shares plummeted to their lowest close in five and a half years, and the Japanese market lost nearly 10 percent of its value. Rates on major currencies gyrated wildly amid the frenzied stocks rout.

The yen soared to multiyear highs versus the dollar and euro on risk aversion, and sterling suffered its biggest one-day drop against the dollar since September 1992 on signs that the British and euro zone economies were on the ropes.

"This has become much more global than it was two weeks ago. No one or no market is immune," said Robert Macintosh, chief economist at Eaton Vance Corp in Boston.

"People are running to safety," he said. "It is interesting how the dollar has been bashed for years and that is the currency that everybody wants to own."

Data showed Britain's economy contracted in the third quarter for the first time in 16 years while the euro zone's private sector economy shrunk this month at its fastest pace since the monetary union.

Oil tumbled as far as $62.65 a barrel on expectations the economic downturn would sap fuel demand, taking the steam out of an OPEC agreement to cut output. Gold snapped a three-day losing streak as safe-haven buying emerged also fell, while U.S. government bonds benefited for much of the day as the market's traditional safe haven.

Energy companies also tumbled, dragged down by the more than $3 drop in the price of oil.