The nation’s financial markets on Wednesday reflected worse fiscal conditions of the United States and European countries, seeing most key indices negatively affected.

In the wake of anxiety that the U.S. economy could enter into a double-dip recession, local stocks tumbled and the Korean won lost ground against major currencies.

The benchmark KOSPI fell by 55.01 points, or 2.59 percent to close at 2,066.26 on the Korea Exchange. The index plunged more than 3 percent at one time during the day’s trading session.

The won dropped against the dollar due mainly to massive buying of the U.S. greenback among foreign traders.

The dollar closed at 1,060.4 won, gaining in value by 9.6 won from a day earlier, ending above the 1,060 won mark for the first time in almost two weeks.

While the Korean currency has continued to appreciate over the past several weeks, it and other Asian currencies are forecast to stand in a weak position over the coming weeks.

Worries about the U.S. economic fundamentals started after the U.S. gross domestic product data was announced last weekend.

GDP expanded at an annual rate of 1.3 percent in the second quarter, following a 0.4 percent advance three months earlier.

Manufacturing and consumer spending data boosted jitters over the U.S. economic slump. The Institute for Supply Management’s U.S. factory index fell to 50.9 in July from 55.3 in June, underpinning concerns over the deteriorating picture for the world’s largest economy.

The U.S. Commerce Department said overnight the country’s consumer spending fell 0.2 percent in June. It was the first drop in almost two years, and marked a turnaround from a 0.1 percent rise the previous month.

U.S. stocks tumbled overnight on increased worries about the faltering economic growth.

The Dow Jones Industrial Average sank 265.87 points, or 2.19 percent, to 11,866.62.

A Seoul analyst said the U.S. economy has already entered into recession because the growth rate stayed around the 1 percent level in the first half.

“Considering inflation, the economy may be regarded as falling into recession,” he said.

By Kim Yon-se (kys@heraldcorp.com)