GLOBAL MARKETS - Asia stocks drop, haunted by growth fears

By Kevin Plumberg

HONG KONG (Reuters) - Asian stocks fell sharply on Friday, halting a four-day rally, after weak U.S. housing and jobs data and volatility in the financial sector once again reminded investors of the fragile state of the global economy.

Japan's Nikkei share average fell 2 percent and European stocks opened as much as 1 percent lower.

Oil rose from a seven-week low to around $125.95 a barrel, though the view that U.S. energy demand is deteriorating is keeping a lid on prices.

The U.S. dollar fell against the yen and Swiss franc, two currencies associated with stability in times of market turbulence, while Japanese government bond prices rose as concerns about the global economy resurfaced.

Reports overnight fuelled fears Britain, the euro zone, Japan and the United States are sliding toward recession. German business sentiment this month suffered its biggest decline since the 2001 attacks in New York and Washington, while existing U.S. home sales were the lowest in a decade.

"With the continuing deceleration in the global economic backdrop, export-dependent Asian economies in general are poised for weaker growth," said Thomas Lam, senior Treasury economist with United Overseas Bank in Singapore.

"The negative spillover from the major economies on Asian growth tends to occur with a lag," Lam said, adding that weak U.S. growth late last year is being felt in Asia only now.

Canon Inc was the second-biggest drag on Japan's stock index, falling almost 5 percent after the company on Thursday posted a 12 percent fall in quarterly profit.