Bloomberg News - Russia Rating Cut by Moody’s on Sluggish Economic Growth

Photographer: Vasily Maximov/AFP via Getty Images

Russian President Vladimir Putin and European negotiators are struggling to hold together a six-week truce in eastern Ukraine, inching forward in talks to prevent the fighting from escalating

Russia’s ruble dropped and sovereign bonds were little changed after the country’s credit rating was cut to the second-lowest investment grade by Moody’s Investors Service amid sanctions over Ukraine.

Moody’s downgraded the sovereign one level to Baa2 from Baa1 and kept a negative outlook on the rating on Oct. 17. It is in line with Fitch Ratings Ltd.’s credit grade and one step above Standard & Poor’s, which lowered Russia to BBB- in April. The yield on the nation’s March 2030 Eurobond fell one basis point to 4.81 percent. The ruble weakened 0.2 percent to 40.84 versus the dollar as of 11:45 a.m. in Moscow.

Russia has spent $13 billion from its foreign reserves this month to slow the ruble’s weakening as tumbling oil prices add to the woes of an economy that’s teetering toward recession amid the sanctions by the U.S. and European Union. President Vladimir Putin and European negotiators are struggling to hold together a six-week truce in eastern Ukraine, inching forward in talks to prevent the fighting from escalating.

“It’s negative news, but it’s not really critical because it’s still an investment grade,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said by phone yesterday. “It was expected and therefore the negative reaction will probably be limited.”

The downgrade is driven by “Russia’s increasingly subdued medium-term growth prospect,” Kristin Lindow, an analyst at Moody’s Investors Service Inc., said in a phone interview on Oct. 17. “The gradual and ongoing erosion of the country’s international reserve buffer” contributed to a weakening of Russia’s creditworthiness, she said.

Extra Yield

The extra yield investors demand to own Russia’s dollar-denominated government bonds due in September 2023 instead of similar Treasuries was 2.86 percentage points today, compared with an average of 2.16 since the notes were sold 13 months ago, according to data compiled by Bloomberg. The spread has increased as the U.S. and its allies accused Russia of inciting the rebellion in eastern Ukraine, an allegation Putin denies.

The ruble has lost 14 percent against the dollar in the past three months, more than any other currency tracked by Bloomberg, extending its drop this year to 19 percent. Foreign reserves (RUREFEG) have declined 11 percent this year to a four-year low of $452 billion as the central bank acted to shore up the ruble.

Brent crude’s 25 percent drop from its June peak further damped Russia’s growth outlook. The country derives more than half its budget revenue from energy.

Reserves Sufficient

Putin said on Oct. 17 that Russia won’t spend all of its $451.7 billion in reserves defending the ruble.

“Bank of Russia, on the one hand, will pursue balanced financial policies,” Putin told reporters on a trip to Milan. “That means that it will use elements of a floating exchange rate and won’t mindlessly burn up all its reserves. But there’s enough reserves to adjust the level of the national currency.”

Moody’s expects Russia to fall into a recession in 2015 for the second time since 2009, contracting 1 percent after growing 0.5 percent this year, Lindow said. The International Monetary Fundpredicts a growth rate of 0.5 percent next year.

“The rating remains investor grade,” former Russian finance minister Aleksei Kudrin said on his Twitter account on Oct. 18. “Further downgrades may be extremely negative for the financial market.”

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Elena Popina in New York at epopina@bloomberg.net; Daria Solovieva in Dubai atdsolovieva1@bloomberg.net

BBC News - Aberdeen, Glasgow and Southampton airports sold in £1bn deal

Aberdeen, Glasgow and Southampton airports have been sold by owners Heathrow Airport Holdings (HAH) in a £1bn deal.

The three airports will now be owned by a consortium formed by two companies - Spanish firm Ferrovial and Australia-based Macquarie.

The sale is expected to be completed in January of next year.

The three airports will be managed locally but supported by Ferrovial's and Macquarie's shared ownership.

Ferrovial already part-owns Heathrow, the UK's busiest airport, and holds a 25% stake in HAH, which was previously known as BAA.

The deal means HAH will now operate only its flagship London hub.

The company had previously operated seven airports but an inquiry by the Competition Commission ordered it to be broken up.

By the time of the ruling it had already sold Gatwick, before later disposing of Edinburgh and announcing the sale of Stansted last year.

Douglas Fraser

BBC Scotland business and economy editor

The sale of Glasgow, Aberdeen and Southampton airports has been some time coming. Since the competition regulator took aim at the formerly nationalised British Airports Authority, later BAA plc, the break-up of that empire has looked likely.

Gatwick was sold five years ago for £1.5bn, and is now fighting hard to get the planning nod for a new runway, instead of letting Heathrow expand.

Either Edinburgh or Glasgow had to be sold, BAA was told, so the capital's airport went to the same infrastructure investors who own Gatwick for a whopping £807m.

Renaming itself Heathrow Airport Holdings plc, the parent company then had to shed Stansted, going for £1.5bn to council-controlled Manchester Airport. And that left the three smaller parts of the company awaiting their fate.

The uncertainty over ownership has not been helpful for them. New owners may be willing to invest in upgrading Aberdeen's facilities, while helping Glasgow compete more effectively with both Edinburgh, its new rival, as well as the beleaguered Prestwick. But then, those investors will also want a return on their billion pounds.

Heathrow itself is 25% owned by Ferrovial with other stakes controlled by investment vehicles from Qatar, Quebec, Singapore, the US, and China.

Heathrow chief executive John Holland-Kaye said: "This sale enables us to focus on improving Heathrow for passengers and winning support for Heathrow expansion.

"Heathrow is the UK's only hub airport, connecting the whole of the UK to the world and bringing economic benefits locally and nationally."

Edward Beckley, Macquarie's European head, said the firm had a "long and successful track record of investing in and developing airports around the world".

He added: "We look forward to working with these airports over the long term to support route growth and enhance the passenger experience for the communities they serve."

Ferrovial chief executive Inigo Meiras said: "We are committed to improve these facilities and their services looking to a better passenger experience and in order to grant access to further domestic and international destinations."

• Glasgow is the eighth busiest of the UK's airports, with 7.4m passengers and 104,000 aircraft movements in 2013.
• Aberdeen is 14th busiest, with 3.4m passengers and 73,000 aircraft movements.
• Southampton is 18th busiest with 1.7m passengers and 36,000 movements.

Amanda McMillan, managing director of Glasgow Airport, said: "Clearly this is a landmark day for Glasgow Airport and whilst we will be sorry to leave the Heathrow group, we do so knowing we're in an extremely strong position.

"We have benefited from considerable investment in recent years and have achieved a great deal of success in securing new routes and growing passenger numbers. Together with my team, I am looking forward to working with Ferrovial and Macquarie to further develop our airport and ensure it continues to deliver for Glasgow and Scotland."

Carol Benzie, managing director of Aberdeen Airport work on the deal had been taking place behind the scenes for several months.

She added: "Locally things remain very much business as usual. Our passenger numbers continue to grow, and we will continue to operate as we have been with a focus on the safety and security of our customers, as well as on delivering an excellent standard of customer service.

"No changes to the way we operate are planned and we will keep striving to deliver on all our commitments in the run up to a formal handover by the end of the year."

The deal was welcomed by local authorities, with Glasgow City Council leader Gordon Matheson saying: "Glasgow Airport is of huge strategic importance for the city and the west of Scotland with over 5,000 jobs dependant on its continued success.

"Its success is vital to ensure that Glasgow and our city region continues to be an attractive location for investment and for local businesses to expand overseas.

"I'm encouraged to see that this deal is backed with a wealth of experience in both the air industry and public infrastructure - and my council will continue to work in close partnership with our airport to ensure it meets the needs of local business and leisure travellers."

Mark Macmillan, the leader of neighbouring Renfrewshire Council, said the deal would give Glasgow Airport "security of ownership and more certainty for the future".

Glasgow Chamber of Commerce chief executive Stuart Patrick said: "The existing management team has done an excellent job in promoting the airport's assets and attracting in new flights over what have been rough times. There is still huge potential for growth and route development, and that has obviously influenced the attractiveness of Glasgow as an investment."

Bloomberg News - World Economy Gives Investors Growth Scare as They Look to U.S.

Photographer: David Paul Morris/Bloomberg

The hopes of financial markets is riding on the U.S. to resume its historicalrole as a locomotive robust enough to pull up demand elsewhere.

The global economy faces its biggest test of confidence since the European sovereign debt crisis as investors fear it’s running out of engines.

Japan and the euro area are throwing up fresh signs of weakness by the day and emerging markets such as China are dragging instead of driving growth. The sense of tumult is being exacerbated by war in the Middle East, the standoff in Ukraine, street protests in Hong Kong and the spread of Ebola to Dallas.

The worry is that five years since the world limped out of recession, central banks have virtually exhausted their stimulus arsenals if activity keeps fading. That leaves the hopes of financial markets riding on the U.S. to resume its historical role as a locomotive robust enough to pull up demand elsewhere.

“The global economy and the markets have a history of traumatic economic events,” said Paul Mortimer-Lee, chief economist for North America at BNP Paribas SA in New York. “Psychologically and physically they have not recovered fully and are anxious about a relapse.”

The doubts were evident across financial markets yesterday as a bear market in oil deepened, the Standard & Poor’s 500 Index came close to surrendering its gains for the year and bonds from Germany to the U.S. rallied. The Chicago Board Options Exchange Volatility Index, a measure of investor nerves known as the VIX, is at its highest since June 2012.

U.S. stocks pared losses after Bloomberg News reported that Fed Chair Janet Yellen voiced confidence in the durability of the American expansion at a closed-door meeting in Washington last weekend. The S&P 500 closed 0.8 percent lower after dropping as much as 3 percent.

Avoiding Commodities

A Bank of America Corp. survey of fund managers this week showed the lowest optimism in the outlooks for economic growth and inflation in two years, pushing them to increase their cash balances and avoid commodities.

“Investors have huge questions about the world right now,” said David Kotok, chairman and chief investment officer at Sarasota, Florida-based Cumberland Advisors Inc.

The latest catalyst for concern was the news that U.S. retail sales dropped 0.3 percent in September and wholesale prices unexpectedly fell for the first time in a year.

That added to the drumbeat of disappointing data from elsewhere, which this week alone included the weakest German investor confidence in two years and Chinese factory-gate prices dropping for a record-tying 31st month.

Japanese industrial production tumbled 3.3 percent from a year ago, and U.K. inflation unexpectedly plunged to its lowest in five years. Prices in Israel and Sweden are even falling in an indication of deflation.

European Epicenter

The epicenter of the economic worries is the euro area, where European Central Bank President Mario Draghi is trying to tackle the weakest inflation in almost five years as investors bet it will deteriorate further amid signs powerhouse Germany is now faltering.

Having pulled the euro-area economy out of its debt panic in 2012, Draghi has sought to boost prices by cutting interest rates to record lows, issuing cheap loans to banks and laying the groundwork to begin buying private-sector assets this month.

That leaves purchases of government debt as the last option. While Draghi says he is open to quantitative easing if necessary, it would run into opposition from Germany. Governments throughout the bloc have yet to deliver the economic reforms and easier fiscal policy he would prefer to see first.

“Europe has now entered a more dangerous phase in their crisis,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “They’ve got to do quantitative easing. They don’t have any choice because that’s the only game in town.”

Emerging Markets

Unlike five years ago when they proved strong enough to lift the world out of its slump, emerging markets are now stumbling, too. A property slump in China is pushing down the nation’s annual growth to what analysts project is the slowest pace since 1990, while Brazil is trying to escape the recession it entered in the first half of the year.

Some emerging markets are being sideswiped by subpar global growth as geopolitical tensions from the Ukraine conflict also weigh on investor confidence and threaten to sink Russia’s economy into a recession, Gustavo Reis, a New York-based economist at Bank of America Corp., said in a phone interview.

“We’re seeing an impact not only on the Russian economy, which is pretty visible, but also on European confidence indicators,” Reis said. “That is having an impact on the global economy.”

Oasis of Prosperity

The biggest reason for confidence that the storm will prove short lived are signs the U.S. is again a potential oasis of prosperity even as the foreign weakness and rising dollar draw the concern of Federal Reserve officials.

Grounds for optimism include the lowest unemployment rate in six years, a deleveraging of debt by companies and households and the likelihood cheaper energy and low bond yields will support consumer spending and business investment.

“Things aren’t looking bad enough in the rest of the world to drag the U.S.,” said Peter Hooper, chief U.S. economist at Deutsche Bank AG and a former Fed official. “I wouldn’t say the world’s falling apart by any means.”

The growth scare in markets comes just days after finance chiefs were urged by the International Monetary Fund to find new ways to support their economies after the Washington-based lender again cut its outlook for global growth this year and next.

Budget Deficits

The problem is even with inflation now close to its recessionary lows by some measures, governments and central banks are almost out of ammunition, having exhausted it by swelling budget deficits and cutting interest rates in the aftermath of the financial crisis.

In addition to the ECB, the Bank of Japan is holding off boosting its quantitative-easing program and China is refraining from broad-based stimulus. Germany is pushing back against calls to spend more.

“My concern is that the markets are looking for a ramping up of policy support elsewhere and that may not be delivered,” said Charles Collyns, chief economist at the Institute of International Finance and a former U.S. Treasury official.

Less worried is Julian Jessop, chief international economist at Capital Economics Ltd. in London. The U.S. is robust, China is switching to more sustainable growth, cheaper oil should support demand and policy makers can ease policy if they really need to.

“It’s hard to be positive given how negative the mood is in the markets but I think sentiment is unnecessarily pessimistic,” he said.

To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net; Andrew Mayeda in Ottawa at amayeda@bloomberg.net

BBC News - China inflation slows to near five-year low

Inflation in China eased to a near five-year low in September, adding to further evidence of a slowdown in the world's second largest economy.

Economists say the unexpected inflation figures show a weak domestic economy

The consumer price index (CPI) rose 1.6% in September from a year ago - the lowest since January 2010.

That also missed market expectations of a 1.7% yearly rise, and was down from 2% in August.

The slowing inflation rate could be a result of good harvest weather in China, said Tim Condon at ING.

"Typically the months we need to worry about for food in China are in the middle of the year and the beginning January/February which are Lunar New Year contagion months, so we're in the soft period now for food component inflation," he said.

Will Beijing step in?

Economists said the recent figures give policymakers a lot of room to stimulate the economy with inflation well below Beijing's official annual target of 3.5%, but most are divided on whether authorities will step in.

"Everything I'm hearing from the authorities is they feel the economy is broadly in a good shape and not needing broad assistance that would come from a deposit rate cut or an RRR [reserve requirement ratio] cut," Mr Condon said.

Trade figures on Monday did show that China's exports and imports in September were far higher than expected, giving a surplus of $31bn (£20bn).

But economist Li Huiyong at Shenyin & Wanguo Securities said the unexpected inflation figures show a weak domestic economy.

"We expect policymakers will take more measures to stabilise the economy. The possibility of an interest rate cut is increasing in the coming months."

Reuters News - Irish budget set to phase out multinationals' favorable tax arrangement

Ireland's Finance Minister Michael Noonan attends an interview with Reuters at his office in central Dublin February 11, 2014.

CREDIT: REUTERS/CATHAL MCNAUGHTON

(Reuters) - Ireland is set to announce sweeping changes to its corporate tax structure in its budget on Tuesday, phasing out a loophole that has allowed multinationals to save billions of dollars in tax on their worldwide income.

The country has faced sustained criticism over the past 18 months from other European Union members and the United States for its tax rules and Finance Minister Michael Noonan is expected to lay out plans to end an arrangement that has enabled firms such as Google and Apple to cut their overseas tax rates to single digits.

To maintain Ireland as an attractive destination for business, Noonan could at the same time make improvements to theintellectual property tax regime, and also has room to cut income tax following the economy's surprisingly strong rebound from the debt crisis.

The change in corporate tax structure will be the country's most significant tax reform since it lowered the corporate tax rate to 12.5 percent in the late 1990s to entice companies to bring jobs to the country.

Among the most criticized parts of the Irish tax code is a complex corporate structure whereby a multinational can channel untaxed revenues to an Irish subsidiary, which then pays the money to another company registered in Ireland that is tax resident elsewhere -- usually in a tax haven such as Bermuda.

Under the measures Noonan is set to announce, all Irish-registered firms would over time automatically be deemed to be tax resident in Ireland, bringing Irish law in line with U.S. and British rules, two sources familiar with the matter said last week.

At risk for Ireland are the 160,000 jobs -- or almost one in every 10 workers in the country -- employed by some 1,000 foreign firms that have set up a base in Ireland to benefit from its tax code and flexible, English-speaking workforce.

Noonan will look to balance out the planned changes by ensuring Ireland remains an attractive destination, probably through adjustments to intellectual property tax.

"It's important that there is also a positive message and some definitive action in terms of improving our existing regime, or at the very least a roadmap for future changes," said Peter Vale, a tax partner at Grant Thornton.

"There can be no period of uncertainty where our regime lags behind competing jurisdictions. The UK has already positioned itself as a serious competitor in terms of attracting overseas investment, with tax policy a key factor in their success."

While the corporate tax changes will be watched closely in Brussels and Washington, closer to home workers reeling from seven years of austerity will want to know how Noonan plans to take advantage of an unexpectedly sharp economic upturn.

Ireland originally required tax hikes and spending cuts of 2 billion euros to bring its budget deficit below an EU limit of 3 percent of GDP next year. But with the economy set to grow by 4.7 percent in 2014, Noonan has some room to instead cut income tax, possibly by lowering the top 52 percent tax rate or raising the income threshold for that rate, which currently hits middle as well as high-income earners. He could also announce the hiring of more teachers and increase benefits.

While economic growth is far outstripping most of Europe, consumers have yet to feel the benefit, putting Noonan's Fine Gael party and coalition partner Labour on the clock to change that with 18 months to go until they seek re-election.

They were served a reminder on Saturday as tens of thousands rallied against new water bills in the biggest anti-austerity protest for years as a candidate calling for a boycott was elected to parliament in a by-election.

"It's seven years of horrendous difficulty for people and we want to ensure that there is a dividend in the years to come and much of this will be confirmed tomorrow," transport minister Paschal Donohoe told reporters on Monday.

"But we will not do anything at all to jeopardize the recovery and any changes in tax will respect that."

BY PADRAIC HALPIN

Bloomberg News - Italy on Sale to Chinese Investors as Recession Bites

Photographer: Gianluca Colla/Bloomberg

The sun sets over Milan in this view from the Duomo di Milano, or Milan Cathedral, in Milan. More than 90 Chinese groups, excluding Hong Kong, had a stake in Italian firms at the end of 2013, up almost 20 percent, according to the Milan-based Italy-China Foundation, which promotes business among the two countries.

Clotilde Narzisi and Luca Soliman have run the Caffe Orefici, 200 feet from Milan’s iconic Duomo Cathedral, for 10 years. Forced to sell their business because of high taxes, they say their only hope now is to leave it in Chinese hands.

“They are the only ones who are buying,” said 43-year-old Narzisi during a break after the lunch-time rush of businessmen and shoppers in the heart of Italy’s financial capital. “We want to sell, taxes are too high; we work eight hours a day for the state and one hour for us.”

Caffe Orefici is among the 18,000 advertisements from businesses and individuals that have been published since February last year on Vendereaicinesi.it-- sell to the Chinese -- a website that helps Italians, stricken by the third recession in six years, attract bids for properties, products and services from Chinese suitors.

While Italian stores turn to the local Chinese community, the country’s largest companies are seeking investments directly from the Asian giant. Italy has been China’s biggest target in Europeafter the U.K. this year, with cross-border acquisitions for $3.43 billion, according to Bloomberg available data.

Prime Minister Matteo Renzi, who’s struggling to cut Europe’s second-biggest debt of more than 2 trillion euros ($2.53 trillion), urged Chinese investors in June during a Beijing visit to buy stakes in Italian companies, following his counterparts in Greece and Portugal who tapped Chinese money to raise revenue and exit bailout programs.

Mandarin Site

Chinese Premier Li Keqiang will attend a summit of European and Asian leaders and other business events in Milan from Oct. 16, completing his week-long European visit. He wrote in a letter to Italy’s biggest financial newspaper Il Sole 24 Ore today that relations between China and Italy are entering a new phase which will give benefits to both countries.

The Caffe Orefici bar managers turned to Vendereaicinesi.it, whose ads are translated into mandarin and can also be published in other Chinese websites for a fee, after striking out with a local agent. Their ad was viewed 400 times in three weeks and they received four expressions of interest, said Narzisi. Ads range from an ice-cream parlor in Tuscany to a historic jeans shop in Cremona and a Ferrari 458 Italia.

Online Tool

“We realized that an online tool to link Italians and Chinese was missing,” said Simone Toppino, 35, who co-founded with his brother Alberto and Alessandro Zhou the website that has a mirror mandarin site Maimaiouzhou.com. They charge 42 euros to about 90 euros for their services. Most Chinese users of the website live in Italy. Bankruptcies have reached a record high this year, with more than 8,000 companies going bust in the first half in Italy, Cerved Group SpA data show.

While unemployment near a record of 12.7 percent and fiscal burden at an all-time high make it difficult for Italians to access credit, the 321,000 Chinese living in the country are better positioned as they can count on family networks rather than banks for financing, said Toppino, who’s from the northwestern town of Alba.

Renzi flew to China in June with a delegation of dozens of Italian companies to help broker deals. A few weeks later, Italy’s state lender announced the sale of a stake in energy grids holding company CDP Reti SpA to State Grid Corp. of China for 2.1 billion euros.

Cross-border Acquisitions

People’s Bank of China in July disclosed stakes in some of Italy’s biggest companies, Fiat SpA (F), Telecom Italia SpA (TIT) and Assicurazioni Generali SpA (G), adding to investments inEni SpA (ENI) and Enel SpA (ENEL) in March for a total of 3.04 billion euros.

Chinese global cross-border acquisitions topped $54.3 billion this year, up 35 percent, Bloomberg available data show. Shanghai-based Fosun International Ltd. (656) in January outbid a U.S. buyout firm for Portugal’s 80 stake in Caixa Geral de Depositos SA’s insurance unit for 1 billion euros. Hong Kong-based Cosco Pacific Ltd. (1199) is among bidders of a state-fund stake inPiraeus Port Authority (PPA) while a Chinese venture is seeking a majority in Athens International Airport.

“We registered an increase in clients interested in investments in Italy last year and the trend has continued in 2014, with a growth of almost 50 percent,” said Sara Marchetta, resident partner of law firm Chiomenti in Beijing, which advised State Grid in the biggest deal in Europe for a Chinese firm this year.

Win-Win

Fashion, machinery and industrial equipment are target industries, she said. Retail group Shenzhen Marisfrolg Fashion Co. Ltd bought ready-to-wear brand Krizia in February.

“I believe Italy’s strong reputation for creativity and consumer brands can be combined with China’s enormous demand for quality goods to create” a win-win situation for both countries, Fred Hu, chairman of Beijing-based Primavera Capital Group and former China head of Goldman Sachs Group Inc. said by e-mail. “We are naturally interested in investing in Italy across sectors such asconsumer goods, manufacturing and financial services.”

More than 90 Chinese groups, excluding Hong Kong, had a stake in Italian firms at the end of 2013, up almost 20 percent, according to the Milan-based Italy-China Foundation, which promotes business among the two countries. In May, state lender Cassa Depositi e Prestiti SpA’s strategic fund sold a 40 percent stake in Ansaldo Energia SpA, formerly owned by state defense holdingFinmeccanica SpA (FNC), to Shanghai Electric Group Co. (2727) A China CNR Corp.-led group made it to the short list of two bidders for Finmeccanica’s transport units.

In Rome, Pompi store, famous for its tiramisu dessert, is in talks to sell one historical shop in the San Giovanni area to the Chinese, according to la Repubblica. “Residents will have time and peace to learn Chinese,” the owners wrote in a controversial sign on the counter that riled the local Chinese community, according to the newspaper.

To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

BBC News - Oil prices drop to four-year low

Oil and share prices fell further in early European trade as fears deepened over prospects for the global economy

The Brent crude benchmark fell $1.65 a barrel to $88.40, a price not seen since November 2010.

The head of the IMF, Christine Lagarde, crystallised investors' worries about flagging economic growth when she warned the eurozone could slip back into recession.

London's FTSE 100 share index was down 29.66 points, or 0.46%, at 6,402.19.

Shares in Paris and Frankfurt were down a similar amount.

The falls came after similar declines in the US and Asia. The Dow Jones on Thursday had its biggest one-day fall of the year, closing down almost 2% at 16,659.25.

In Tokyo on Friday, the Nikkei closed down 1.15% to a two-month low of 15,300.55 points.

US oil fell $1.92 a barrel to $83.85, its weakest level since June 2012.

Both oil benchmarks have lost about 20% since their peak in June.

This week, German economic data has presented a consistently negative picture, with Thursday's release showing export numbers down 5.8% in August.

The International Monetary Fund's comments that there was a 35-40% chance of the eurozone re-entering recession piled on the woes.

The IMF also cut its forecasts for global growth in 2014 and 2015.