World stocks fell sharply Thursday as fears of a deep global recession gripped markets and sent oil prices below $50 a barrel to levels not seen in more than three years.

U.S. stocks capped another dismal day for world equity investors, with the broad Standard & Poor's 500 index ending at its lowest closing level since April 1997, falling 6.7 percent to 752.44. The Dow Jones industrial average, meanwhile, shed 444.99 points, or 5.6 percent, to 7552.29, its lowest close since March 2003.

Trading was almost as bleak in Europe, where the FTSE 100 index of leading British shares closed down 130.69 points, or 3.3 percent, at 3,874.99, while Germany's DAX lost 133.89 points, or 3.1 percent, lower at 4,220.20. The CAC-40 in France was 107.47 points, or 3.5 percent, lower at 2,980.42.

In Latin America, Mexico's benchmark IPC index dropped 2.1 percent to 18,191. Argentina's Merval index fell 6 percent to 869 as the senate debated a government takeover of private pension funds and Chile's IPSA index slipped 3.6 percent to 2,401. Brazilian markets were closed for a holiday.

The latest bout of selling in the U.S. was stoked by a Labor Department report showing that new applications for jobless benefits unexpectedly rose to a 16-year high of 542,000 last week from a downwardly revised figure of 515,000 in the previous week. Analysts had been expecting a modest decline to around 505,000.

The gloomy global economic outlook was reflected in oil prices. Light, sweet crude for December delivery fell 7 percent, or $4, to settle at $49.62 on the New York Mercantile Exchange. Benchmark crude fell as low as $48.50 a barrel in Nymex trading, levels last seen on May 18, 2005, when oil hit $46.80 a barrel.

Oil prices have fallen 66 percent since reaching a record $147.27 a barrel in mid-July.

Stocks have been in retreat for most of the week amid concerns about the global economy after further grim U.S. economic news and as the Big Three Detroit-based automakers pleaded to be bailed out by Congress.

''Extreme risk aversion and market volatility re-emerged this week as Congress debated the need to rescue the U.S. automotive industry from near certain collapse,'' said Michael Woolfolk, an analyst at Bank of New York Mellon.

Though stock investors have moved to price in recessions around the world in their valuations of companies, they remain wary of returning to the markets to buy up beaten down stocks, lest they fall victim to another bout of selling.

''I think what's happened is there are so many moving parts that nobody is able to understand what all of the implications are,'' said Joe Clark, managing director of Financial Enhancement Group in Anderson, Ind.

He said the worries about the automakers and the fear among consumers are leaving investors unwilling to step in and buy stocks until there is some clarity over how much the economy might slow.

As well as the uncertainty around individual companies, investors remain worried about broader economic news flow around the world.

So far, Japan, Hong Kong and European countries including Germany and Italy are officially in recession and most expect the U.S. and Britain to be joining them soon, whatever fiscal stimulus policy-makers come up with in the coming days and weeks.

Businesses have been quick to respond to the gloomy outlook by cutting jobs. Most notably, Citigroup said Monday that it is cutting 53,000 jobs around the world.

In Japan, Isuzu Motors Ltd. fell 17 percent after the truck maker said it will cut 1,400 contract workers as it scales back production for this fiscal year. Isuzu is the latest automaker to announce production cuts, joining domestic rivals such as Toyota Motor Corp. and Honda Motor Co.

In Britain, aircraft engine maker Rolls-Royce PLC said it plans to cut up to 2,000 jobs next year as demand for its products slumps amid the global economic downturn.

Earlier, Tokyo's benchmark Nikkei 225 average slid 570.18 points, or 6.9 percent, to 7,703.0 as figures showed exports in October sank 7.7 percent, the biggest decline since 2001, causing the country -- an export powerhouse -- to report a rare trade deficit.

Elsewhere in Asia, South Korea's main index fell for its eighth straight session, losing 6.7 percent to 948.69, as the country's currency, the won, fell to its lowest level in more than a decade. Hong Kong's Hang Seng benchmark sank 517.24 points, or 4 percent, to 12,298.56.

In Australia, the main stock measure retreated 4.2 percent as weakening commodity prices dragged down the country's natural-resource giants.

Compared to the rest of Asia, mainland China's markets suffered modest losses, after speculation over a possible deal by Disney to build a long-awaited theme park in Shanghai boosted property shares. The benchmark Shanghai Composite Index fell 1.7 percent.

The euro dropped to $1.2507 in late New York trading Thursday from $1.2602 late Wednesday, while the British pound declined to $1.4812 from $1.5025. The dollar slid to 94.79 Japanese yen from 96.37 yen as the Japanese currency surged broadly.

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AP Business Writer Jeremiah Marquez in Hong Kong, and AP Writer Julie Watson in Mexico City contributed to this report.