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. Last Updated: 07/27/2016

Markets Battered as Fear Grips Investors

LONDON -- Fears about global finances combined with worries about an Iraq war on Monday to knock European and Asian shares down sharply and push up prices of safe-haven bonds.

Oil prices, already driven higher by the potential of conflict in the Gulf, jumped on news of a suspected terror attack on an oil tanker in the Middle East.

The dollar hit a two-week high against the Japanese yen but was steady against the euro.

Worries about the financial stability of the banking sector rippled across European bourses, which were already undermined by losses in Asia and on New York last Friday.

The FTSE Eurotop 300 index was off 1.3 percent, with the narrower DJ Euro Stoxx 50 index shedding nearly 1.2 percent. Both had recovered from earlier lows.

Germany's DAX was particularly hard hit, falling to levels last seen in September 1996, with speculation about problems at Commerzbank to the fore.

"There was only one way we could go after the U.S. and Nikkei falls and there is not a glimmer of good news out there," said a trader at a leading German bank.

In Tokyo, stocks crumbled to fresh 19-year lows as investors sold banks and debt-ridden borrowers on fears of a wave of corporate failures.

The benchmark Nikkei 225-stock average finished down 3.76 percent at 8,688.00, its lowest close since June 16, 1983, and the biggest one-day fall since June 26. The broader, capital-weighted TOPIX index of all first-section issues was down 3.49 percent at 860.47.

"Sentiment is really shot right now," said Koichi Seki, equity manager at Chuo Securities.

"Investors are scared of the impact of rising bankruptcies. And on top of that, worries of a war in Iraq and a slowdown in the U.S. economy are really weighing."

U.S. blue chip stocks lost 2.45 percent Friday, the sixth straight week of losses. Stock index futures suggested more of the same when Wall Street opened later.

The flight from equities sent euro-zone government bond yields sliding as investors bought bonds.

The interest rate-sensitive two-year Schatz yield was down 2.2 basis points at 2.993 percent. The benchmark 10-year Bund yield was down 1.3 basis points at 4.321 percent.

In the foreign exchange market, the yen tumbled to two-week lows against the dollar and fell half a yen versus the euro.

The dollar rose as high as 123.90 yen and was up more than half a percent in early European trade. The euro advanced to 121.29 yen versus Friday's New York close of 120.65.

The dollar was holding steady against the euro at around $0.9786. World crude prices pulled higher, pushing past $30 per barrel for a while, after a suspected terror attack on a French-flagged tanker off Yemen reinforced concerns of supply disruptions from the Middle East.

London benchmark Brent was up 38 cents to $28.50 per barrel while U.S. benchmark light crude gained 31 cents to $29.93 per barrel. Prices remain below recent $31 highs for U.S. crude.