* Stocks markets battered by recession, earnings fears
* Europe down 2.6 percent, Japan 2.5
* Emerging markets stocks and bonds under heavy pressure
* Dollar rises to two-year high against major currencies
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 23 (Reuters) - Fear of global recession battered
stock markets again on Thursday while a flight from emerging
market debt and stocks helped push the dollar to a two-year high
against major currencies.
European shares lost around 2.5 percent, Asian shares hit
four-year lows and Wall Street looked set for a poor start.
Investors were also focusing on major company earnings
reports, fearful that the worst financial crisis in 80 years and
a deteriorating global economy would combine to decimate
corporate profits.
Emerging markets were particularly under the gun.
MSCI's main emerging market stock index <.MSCIEF> was down
4.3 percent on the day, hitting a nearly four-year low after
major losses on Wednesday. It has lost nearly 35 percent of its
value so far this month.
Emerging market sovereign debt spreads <11EMJ> blew out to
more than 830 basis points over U.S. Treasury yields, a gap not
seen since late 2002.
The cost of insurance against sovereign debt default in
countries such as South Korea, Indonesia, the Philippines,
Russia and Kazakhstan has soared over the past two days.
"There is now little argument that the world economy will
experience a period of sub-par growth, and a recession in
several advanced economies looks increasingly likely," Goldman
Sachs said in a research note.
Investor flight from emerging markets over the past few
weeks has accelerated this week, helping push the U.S. dollar to
new heights as money is both repatriated from overseas and seeks
relative safety in U.S. fixed income.
The dollar index <.DXY>, which tracks the greenback against
a basket of major currencies, hit a two-year high of 86.07,
although it later fell back to 85.75.
The euro was down 0.3 percent at $1.2809 <EUR=>.
"We are going to see the current pressures continue as
tensions in emerging markets continue. The dollar will remain
supported and the high yielders will stay under pressure," said
Ian Stannard, FX analyst at BNP Paribas.
EARNINGS IN SIGHT
European shares were choppy, rising by more than 1 percent
at one point before tumbling. The FTSEurofirst 300 <>
index of leading European shares was down 2.6 percent after
falling 5.4 percent on Wednesday.
Results were mixed. Nestle <NESN.VX>, the world's biggest
food group, reported a forecast-beating rise in nine-month
sales. Agrochemicals and seeds group Syngenta <SYNN.VX> also
reported a strong rise in third-quarter sales.
But Swiss bank Credit Suisse Group AG <CSGN.VX> fell after
it confirmed a 1.3 billion Swiss franc third-quarter loss.
Engineering group ABB <ABBN.VX> plunged after posting a
forecast-missing rise in third-quarter net profit, helped by
demand from emerging markets.
In the United States, Dow Chemical's <DOW.N> chief executive
officer said the U.S. economy already felt like a recession and
that the company would have to revisit its long-term earnings
goals in light of that.
Earlier, Japan's Nikkei average <> hit its lowest point
since May 2003 before paring losses to end down 2.5 percent. It
shed 213.71 points to 8,460.98 after earlier falling as low as
8,016.61, its lowest in nearly five and a half years.
The broader Topix <> ended the day down 2 percent at
871.70 after earlier falling more than 6 percent.
Euro zone government bond yields fell. The two-year Schatz
yield was 10 basis points lower at 2.723 percent <EU2YT=RR> and
10-year Bund yields were down 3 basis point at 3.781 percent
<EU10YT=RR>.
(Additional reporting by Jessica Mortimer; Editing by Victoria
Main)
