Flu fears dampen talk of tentative world recovery

The virus has killed more than 100 people in Mexico, and infections have been reported in the United States and Canada, with possible cases in Europe, Israel and New Zealand. The World Health Organization has declared the flu a "public health emergency of international concern" that could become a pandemic.

Oil dropped more than 2 percent toward $50 a barrel and Asian stocks headed lower on fears of a pandemic -- with drug stocks bucking the downward trend.

European shares were expected to also retreat, with nervousness about swine flu overshadowing robust gains by U.S. equities on Friday.

"This will deepen the global recession and will probably have a contagion effect on export-led economies in Asia," said Daniel Chan, senior investment strategist at DBS Bank in Hong Kong. "All sectors in the stock market may be affected except for health and drugs industries. The airline industry might be affected badly."

On Sunday, global finance and aid ministers warned at a meeting in Washington that the world's poor already faced a human catastrophe from the impact of the financial crisis.

Ministers from the 185 member countries of the World Bank and International Monetary Fund called on rich nations to accelerate aid to the developing world to prevent disaster.

"We must continue to act in real time to prevent a human catastrophe," said World Bank President Robert Zoellick.

The World Bank said the global crisis had been a major setback to world poverty reduction. It said the crisis would push 53 million more people into extreme poverty in 2009, and cause 200,000-400,000 more infant deaths each year.

"These numbers will rise if the crisis deepens and growth in developing countries falters further," it said.