• Friday: Stock market collapse continues

Swedish stocks plunged almost 7 percent Thursday after Wall Street investment bank Morgan Stanley warned that the United States and Europe were on the brink of a new recession.

The Stockholm OMX 30 closed down 6.73 percent, making Thursday one of the worst trading days in modern times.

Bloomberg said that European equities plummeted the most since 2008 as U.S. economic data missed forecasts, two Federal Reserve officials said the central bank shouldn’t act to protect stock investors and Swedish regulators warned that lenders are unprepared for a freeze in money markets.

Bank shares were hardest hit in Stockholm trading.

Lars Frisell, chief economist at the country’s financial regulator, told Bloomberg that Swedish banks must do more to prepare for a deterioration in Europe’s debt crisis that could freeze interbank markets and cut off funding.

“It won’t take much for the interbank market to collapse,” Frisell said. “It’s not that serious at the moment but it feels like it could very easily become that way and that everything will freeze.”

European Union president Herman Van Rompuy's assurances that there was "no new recession" in sight in Europe failed to calm nerves.

The Dow Jones Industrial Average was down 4.1 percent, while the broader S&P; 500 dropped 4.4 percent and the tech-heavy Nasdaq Composite plunged 4.7 percent after about 50 minutes of trading.