NEW YORK (CNNMoney.com) -- Asian markets plunged Friday after the sovereign wealth fund of Dubai requested an extension on billions of dollars worth of debt payments, sparking widespread credit concerns that spilled over to world markets.

Major indexes in Europe managed to regain ground, suggesting that concerns about Dubai World may have been overdone.

The selloff "was a slight over-reaction but a much needed correction," said Dave Babbs, head of trading at MF Global Spreads in London. "We expect to see a lot of exaggerated moves today with thin volumes."

U.S. stock futures were pointing toward a sharp selloff when trading begins in New York. Wall Street was closed Thursday for the Thanksgiving holiday and Friday's session ends at 1 p.m. ET.

The overseas selloff comes two days after Dubai World, a state-owned investment fund, asked creditors for an extension on billions of dollars worth of debt payments due next month so that it could restructure. The move revived fears about the health of the global financial system and caused investors to shy away from risky assets such as stocks.

The dollar and the yen rose against rival currencies as investors flocked to perceived safe-haven assets.

The Dubai World news "brought the credit crunch back after we thought we left it behind last year," said David Jones, chief market strategist at IG Markets in London.

"Things like this remind us that the economic recovery isn't going to be smooth," he added.

In Asia, Japan's Nikkei closed down 3.2% and the Heng Seng in Hong Kong tumbled nearly 5%.

European markets recovered after opening sharply lower. The CAC 40 in Paris edged up 0.2%, while the DAX in Frankfurt and the FTSE in London were both slightly lower.

Trading in New York is expected to be choppy with many market participants off for the holiday.