European shares plummeted Friday as panic selling spread from Asia and the United States amid fears the global credit squeeze could trigger a global recession.

By early morning trading, Europe's benchmark Stoxx 50 had plunged by 8.0 per cent to 2,109 points, after shares on Wall Street dropped by 7.3 per cent to their lowest level in five years Thursday. Tokyo's key Nikkei index also cascaded down by 9.62 per cent.

Shares in Europe's premiere stock market, London, dropped at one point by nearly 10 per cent, driving the key FTSE-Index to below the 4,000-point mark, also for the first time in five years.

The sense of panic was repeated across Europe, with Frankfurt's DAX plunging down by 11 per cent at one point and Paris' CAC 40 index tumbling by more than 10 per cent before recovering slightly. Shares in Milan were down 6.65 per cent at 20,415.

"We are going through a systemic shock in which risk propagates itself through the entire financial system like a virus," said Benoit Debroissia, market analyst at Richelieu Finance in Paris.

The main problem, he said, was that "confidence in the banking system has completely disappeared. (The banking system) does not seem to work any more. And without an efficient banking system, economies do not work."

Amid fears of a stock market crash, stock exchange authorities in Moscow announced that they were delaying the opening of trading.

Meanwhile, the Vienna Stock Market suspended trading shortly after opening Friday in the wake of a 10 per cent fall in shares.

The sell off also swept across Central European bourses, with the Prague Stock Exchange's main PX Index down 10.3 per cent in late morning trading, after plummeting by more than 13 per cent in opening trading.

"Trading will remain hectic unless some significant news comes in," warned Patria Online chief broker Roman Kodera in Prague.

Banking and financial stocks were among the biggest losers across Europe, with Britain's biggest mortgage lender HBOS dropping by more than 20 per cent in early trade. This came just two days after the British government announced a major bail-out package.

Italy's two largest banks, Intesa SanPaolo and UniCredit also lost more than 12 per cent.

Europe's biggest insurer, Allianz, lost 10 per cent in early trade. Shares in other European corporate giants, such as drugmaker Bayer and energy group E. ON, also hit badly by the sell off.

The fall in Tokyo pushed Japanese stocks down below the psychologically important 9,000-point mark for the first time in more than five years, with the Nikkei finishing the week down 24.33 per cent.

The Bank of Japan also injected a record 4.5 trillion yen (44.8 billion dollars) into the money markets Friday in a fresh bid to shore up confidence in the financial system.

The deepening sense of concern about the economic outlook drove up the price of gold - a major investment safe haven - by more than 4 per cent and sent the oil price down by about 5 per cent to 82.63 dollars.

The gloomy prospects for commodities also led Australian stocks to drop 8.3 per cent, with the nation's stock market smashing through the psychologically important 4,000 barrier mid-session.

While the Indonesian Stock Exchange suspended trading in its morning session Friday for the second consecutive trading day, Hong Kong stocks plunged by 8 per cent.

Shanghai's benchmark composite index ended the day down 3.81 per cent.