Stocks fell around the world and bonds jumped as a five per cent slump in crude oil sent markets reeling after Chinese shares tumbled into a bear market.

Oil is sliding for a third week on signs Iranian exports may add to a global supply glut. Commodity producers led losses in Europe and currencies including the Canadian and Australian dollars slid. Bonds gained as the outlook for inflation soured while a measure of credit risk for investment-grade companies in Europe climbed for an eighth day. The Shanghai Composite Index wiped out gains from an unprecedented state-rescue campaign.

The Stoxx Europe 600 Index retreated 1.4 per cent heading for a weekly drop of 1.5 per cent. Europe's benchmark has tumbled 19 per cent since an April high inching closer to the common definition of a bear market. Shares are trading at 14.2 times estimated earnings the lowest in about a year. The Euro Stoxx 50 Index entered a bear market this week.

A measure of commodity producers posted the biggest drop of the 19 industry groups on the Stoxx 600. BHP Billiton fell 5.9 per cent after saying it expects a $4.9 billion impairment charge on onshore US assets. Energy companies slid with Total and Royal Dutch Shell leading declines.

Volkswagen AG retreated 0.8 per cent after data from the European Automobile Manufacturers' Association showed the German carmaker's market share in Europe last year fell for the first time since 2007.

Futures on the Standard & Poor's 500 Index slid one per cent after the index gained 1.7 per cent on Thursday. Investors will be watching quarterly results for indications of the health of corporate America with Citigroup and Wells Fargo & Co among companies scheduled to report earnings Friday.

The MSCI Emerging Markets Index fell 1.2 per cent on Friday and 3.4 per cent this week. Shares in Shanghai entered a bear market for the second time in seven months dropping more than 20 per cent from its December high and sinking below its low during the depths of a $5 trillion rout in August.

The Shanghai Composite Index sank 3.6 per cent on Friday extending losses after a report that some banks in Shanghai have halted accepting shares of smaller listed companies as collateral for loans. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 2.6 per cent to a four- year low.

Energy producers dragged Russia's Micex index down one per cent extending this week's drop to five per cent it's worst performance for the period since March. India South Korea and Thailand also lost at least one per cent while gauges in South Africa and Poland slid more than 0.8 per cent.

Indian stocks tumbled in late trading after quarterly earnings at Hindustan Unilever disappointed investors already spooked by the global market rout.

The Sensex lost 1.2 per cent at the close with bulk of the losses coming after European equities began trading at about 1:30pm local time and Hindustan Unilever reported its results an hour later. Global funds have pulled $515 million from Indian shares so far this month putting the Sensex on course for its worst start to the year since 2011 as China's stocks and currency spurred a global selloff.

Government bonds advanced across Europe as investors sought the safety of fixed-income securities. The yield on German 10- year bunds the region's benchmark bonds declined three basis points to 0.54 per cent. Italy's 10-year yield fell four basis points to 1.53 per cent. In the UK the two-year gilt yield dropped as low as 0.45 per cent the least since May. - Bloomberg