North American stock markets closed sharply lower again today, ending what was a dismal week for equities as fears about the global economy and falling oil prices had many investors selling.

The main benchmark index of the Toronto Stock Exchange sank to its lowest point in almost 18 months. It ended a busy trading day down 263 points, or 1.9 per cent, at 13,473. That followed a drop of almost 300 points on Thursday. Once again, the heavily weighted financial and energy groups led the declines.

"Everybody's concerned about China," said David Baskin, president of Baskin Wealth Management. 'If there's lower growth or even a recession in China, obviously that has a major impact because that's, by most measures, the second biggest economy in the world."

Much of the TSX's slide stems from oil, which has now declined for eight straight weeks. That's the longest losing streak for oil since 1986, a time when OPEC drove the price down as low as $10 a barrel. Oil settled Friday at $40.45 US a barrel, down 87 cents. At one point, it traded as low as $39.86, the first time it had dipped below $40 since 2009.

The Dow Jones industrial average plunged 531 points, or 3.1 per cent, to close at 16,460. With that drop, the Dow entered official correction territory, which refers to a drop of 10 per cent from its record close in May.

It was the first correction for the Dow since 2011, and brought the benchmark's losses for the week to 1,017 points, its worst week since September 2011. The tech-heavy Nasdaq market also moved into correction territory and the broader S&P 500 index had its biggest weekly percentage drop in four years.

The S&P/TSX composite index is down 13.2 per cent from its most recent high in April.

European concerns

European markets were also rattled by news that Greek PM Alexis Tsipras would step down and hold new elections on Sept. 20.

"While the decision to have a new vote is likely to increase political uncertainty in the short term, a fact acknowledged by Moody's the ratings agency, the hope is that the more dysfunctional members of his government will get pushed to the sidelines," said Michael Hewson, chief market analyst at CMC Markets.

The uncertainty over who might emerge to lead the country dragged European shares lower.

France's CAC-40 index declined 3.2 per cent to close at 4631 on Friday while Germany's DAX fell 3.0 per cent to a close of 10,124. The FTSE 100 index of leading British shares was down 2.8 per cent at 6,188.

In China, the mood was even bleaker as evidence mounted that Beijing is either unwilling or unable to step in and stop a widening economic slowdown that's pushed the country's benchmark stock exchange down 12 per cent this week.

New data released Friday indicates activity in China's factory sector shrank at its fastest pace in almost 6½ years in August as domestic and export demand dwindled, adding to worries about lower consumption of crude in the second-biggest oil user.

"China has been on a mission to keep up the illusion of a gradual slowdown, but dealers aren't buying it anymore," said David Madden, market analyst at IG.