* World stocks slide 3 percent on recession, earnings gloom
* Emerging markets lose 4.5 percent to three-year low
* Commodity losses mount, oil skids to below $70 a barrel
* Dollar hits 2-yr high vs basket of currencies
By Mike Dolan
LONDON, Oct 22 (Reuters) - Stock markets around the world
fell sharply again on Wednesday as concerns about economic
recession and falling commodity prices were fuelled further by a
fresh spate of gloomy corporate earnings.
Emerging markets were hardest hit by the global investor
retreat and commodity pressure, with the U.S. dollar boosted by
a repatriation of U.S. money and unwinding of dollar-financed
trades, and major government bonds lifted by a flight to safety.
MSCI's main index of emerging equities <.MSCIEF> fell some
4.8 percent to its lowest level since June 2005, sharply
underperforming the 3.1 percent loss in MSCI's index of world
stock markets <.MIWD00000PUS>.
Asian markets kicked off the day's slide and the rout
continued into emerging European markets, where currencies such
as the Hungarian forint <EURHUF=>, Turkish lira <TRY=> and South
African rand <ZAR=> fell heavily and needed official support.
Six countries in the European region -- Hungary, Turkey,
Ukraine, Iceland, Serbia and Belarus -- are now either in talks
with the International Monetary Fund or have requested IMF help.
Developed markets were not immune. Pan-European stock
indices <> lost more than 4 percent and Britain's pound
<GBP=> shed more than two percent on the dollar to 5-year lows.
S&P 500 futures <SPc1> were down more than three percent,
indicating an similarly negative start later on Wall St.
"The name of the game at the moment is the economy. It seems
as though potentially the worse of the global banking crisis has
been averted. All eyes are very much now focused on the slowdown
in the economic growth," said Richard Hunter, head of UK
equities at Hargreaves Lansdown.
There was widespread concern about highly-leveraged hedge
funds liquidating investments for cash in order to meet
fourth-quarter redemptions from nervous investors.
"The combination of disappointing earnings, plus bleak
guidance, plus the pressure from hedge funds will effectively
lead to the last sell-out in the fourth quarter of this year,"
said FrankfurtFinanz analyst Heino Ruland.
GLOBAL ECONOMIC SHOCK
The emerging markets chill has been triggered in part by the
realisation that no area will be immune from the global economic
slowdown but also concerns about capital flight from countries
where governments have not bolstered shaky banks and guaranteed
their lending - as most European and U.S. authorities have done.
Global miner BHP Billiton <BLT.L> warned early on Wednesday
that Chinese demand was set to weaken, echoing concerns last
week from rival and takeover target Rio Tinto <RIO.L>.
China said on Monday its annual economic growth fell to 9
percent in the third quarter from 10.1 percent previously and
that factory output in September was at a six-year low.
"There is an increase in risk aversion. The emerging market
world appears to be starting to collapse; that means it'll be
much more difficult for the global economy to recover," said
Peter Mueller, rates strategist at Commerzbank in Frankfurt.
Commodity price losses mounted everywhere. U.S. crude oil
futures <CLc1> fell under $70 per barrel again and London copper
futures <MCU3=LX> were down more than 4 percent to their weakest
since December 2005.
The commodity slide and emerging markets retreat all helped
boost the U.S. dollar <.DXY> to two year highs, while gold
prices <XAU=> fell to their lowest in over a month.
"There is big deleveraging from hedge funds triggering a lot
of sales in all asset classes, the vulnerable currencies
especially are getting hit," said one emerging markets trader
from a European bank. "It's a panic situation."
MAJOR MARKETS SUFFER TOO
Even though interbank lending rates in Europe continued to
ease from the extreme peaks of early October [],
European shares followed Asian and Wall St <.SPX> stocks lower.
At 1150 GMT, the FTSEurofirst 300 <> index of top
European shares was down 4.3 percent at 883.95 points, led by
banks, basic resources and energy stocks.
The FTSEurofirst 300 has lost nearly 40 percent so far this
year, punctured by a credit crisis that has piled up the losses
at banks and slowed the economy. Vedanta Resources <VED.L>
dropped 10 percent, BHP Billiton <BHP.L> fell 8.5 percent and
Kazahkmys <KAZ.L> was down 10 percent.
Losses in Asian shares accelerated in late trading there,
with Japan <> ending down 6.8 percent, and South Korea
<> slumping 5.1 percent. Shanghai's main bourse <> was
down 3.2 percent.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> declined 5.1 percent, at one point touching its
lowest since December 2004.
Recent bellwether earnings from the United States have set
the tone. Tech bellwether Texas Instruments Inc <TXN.N> warned
of slowing sales for its widely used analog chips, while
chemical company DuPont Co <DD.N> cut its full-year forecast.
Caterpillar Inc <CAT.N>, a maker of excavators and bulldozers,
also missed profit expectations.
DOLLAR SURGE
The higher dollar made most gains on the British pound
<GBP=D4>, which lost nearly three percent to a five-year low of
$1.6203 in Asian trade after Bank of England chief Mervyn King
warned the UK was entering recession.
Britain will be the first of the Group of Seven top
economies to release third-quarter gross domestic product data
and the figures on Friday are expected to show its economy
contracted in that period.
The cost of protection against defaults in Asian and Europe
debt spiked to records after Argentina on Tuesday said it would
take over its $30 billion private pension system in order to
guarantee payments to retirees. []
By 1155 GMT, the Markit iTraxx Crossover index <ITEXO5Y=GF>,
made up of 50 mostly "junk"-rated credits, was at 785 basis
points, according to data from Markit, more than 10 basis points
wider versus late on Tuesday and after hitting a record high of
795 basis points earlier.
(Additional reporting by Ian Chua, Carolyn Cohn, Sarah
Marsh, Dominic Lau, Kevin Plumberg and Nick Trevethan; Editing
by Ruth Pitchford and Andy Bruce)
