Fears that any tentative green shoots in the global economy could be trampled by a deadly outbreak of swine flu put markets on edge on Monday, after world policymakers said over the weekend that a recovery could begin later this year but plenty of downside risk remained.
The virus has killed more than 100 people in Mexico, and infections have been reported in the United States and Canada, with possible cases in Europe, Israel and New Zealand. The World Health Organization has declared the flu a "public health emergency of international concern" that could become a pandemic.
Oil dropped more than 2 percent toward $50 a barrel and Asian stocks headed lower on fears of a pandemic -- with drug stocks bucking the downward trend.
European shares were expected to also retreat, with nervousness about swine flu overshadowing robust gains by U.S. equities on Friday.
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"This will deepen the global recession and will probably have a contagion effect on export-led economies in Asia," said Daniel Chan, senior investment strategist at DBS Bank in Hong Kong. "All sectors in the stock market may be affected except for health and drugs industries. The airline industry might be affected badly."
On Sunday, global finance and aid ministers warned at a meeting in Washington that the world's poor already faced a human catastrophe from the impact of the financial crisis.
Ministers from the 185 member countries of the World Bank and International Monetary Fund called on rich nations to accelerate aid to the developing world to prevent disaster.
"We must continue to act in real time to prevent a human catastrophe," said World Bank President Robert Zoellick.
