Japan's, world's third largest, slipped back into recession by contracting at a 1.6% annual pace in the July-September quarter. The contraction came despite predictions the economy would rebound from a drop in the previous three months. An economy is generally considered to be in recession when it shrinks for two consecutive quarters.

Confidence in the Japanese recovery took a hit when official data showed that gross domestic product for the world's third largest economy shrank 0.4% in the third quarter. That decline followed a revised 1.9% contraction in the April-June quarter.

Japanese PM Mr Shinzo Abe had pledged to end two decades of stagnation with a strategy dubbed "Abenomics" that included big economic reforms and stimulus.

Already, China is slowing down and Europe can't seem to take off. Among major economies, now only the United States economy, which grew at a 3.5% pace last quarter, remains the last hope.

Growth in China is slowing down from 10.4% in 2010 to an estimated 7.5% this year. Explosive growth in China has been one of the primary drivers of the world economy for the past decade, so its slowdown is having ripple effects. Because China has strong trade links to the West, a slowdown would do some damage to the US and Europe. Its massive manufacturing sector is a big consumer of raw materials, so weaker growth would particularly hurt commodity producing countries like Australia and Brazil.

In addition, the economy of the 18 euro countries has been struggling to grow since it emerged from recession last year. It expanded by a mere 0.2 percent in the third quarter from the previous three month period. The conflict in Ukraine is also raising uncertainty, leading to sanctions between Russia and the US and European Union.

The news not only cast a pall over financial markets worldwide, but oil prices dipped further on news that Japan slipped back into recession and skepticism that OPEC will reach a deal to cut output. US benchmark West Texas Intermediate for December delivery shed US18c to USD 75.64 a barrel on the New York Mercantile Exchange while European benchmark Brent oil for January delivery slipped US10c to USD 79.31 a barrel in London.