World stock markets retreated Thursday amid new concerns about Europe's economic outlook.

An investor looks at a board showing the stock index at a brokerage house in Hefei, in central China's Anhui province. World stock markets tumbled Thursday. (Associated Press)

Oil prices fell more than $3 to $72.61 US a barrel in New York.

The Toronto Stock Exchange was closed for the Canada Day holiday, while U.S. markets slid.

At 3:30 p.m. ET, the Dow Jones industrial average was down 51.24 to 9,722.78. The Standard & Poor's 500 index was down 4.93 to 1,025.78 while the Nasdaq composite index was down almost 12 points to 2,097.39.

Britain's FTSE 100 index of leading shares was lower by 1.3 per cent to 4,855.66, Germany's DAX dropped by 1.1 per cent to 5,900.28, and France's CAC-40 was down 1.8 per cent to 3,379.10.

A key Japanese report from the central bank showed business confidence among Japan's biggest manufacturers improved for a fifth straight quarter.

Asian markets lower

But the optimism wasn't enough to stop the benchmark Japanese bourse from leaving investors with heavy losses. Japan's benchmark Nikkei 225 stock index closed down 191.04 points, or two per cent, to 9,191.60 — a seven-month low — and extended losses from Wednesday's fall of nearly two per cent.

"Sentiment in Asia takes its clues from movement on Wall Street and in the euro zone," said Ben Kwong Man Bun, chief operating officer at KGI Asia Ltd. in Hong Kong. "The Nikkei is following the trend in the U.S."

Other major forces rattling the markets: worries about Europe's ability to cope with debt problems and surveys out of China showing a weakening in its manufacturing in June for a third month.

Public Power Corporation unionists holding a banner protest during a rally against government austerity measures in Athens on Monday. (John Kolesidis/Retuers)

Elsewhere in Europe, prices for a variety of consumer goods rose in Greece on Thursday, as the latest round of governmental austerity measures took effect.

The country's VAT sales tax was raised from 21 to 23 per cent, prompting an immediate rise in gas prices and highway tolls. It is the second VAT increase this year, following hike from 19 per cent in March.

South Korea's Kospi index shed 0.7 per cent to 1,686.24, and Australia's S&P/ASX 200 tumbled 1.5 per cent at 4,237.50.

The Shanghai Composite Index lost one per cent to 2,373.79. Markets in Singapore, Malaysia and Taiwan also fell. Hong Kong's Hang Seng Index was closed for a public holiday.

In currencies, the dollar was little changed from 88.36 yen in New York late Wednesday. The euro rose to $1.2287 US from $1.2233 US.

With files from The Associated Press