Fears drag down European markets
Once again, investors are worried about a global recession
European stock markets showed heavy losses in early afternoon trading as fears of a global recession continued to rattle investors' confidence.
In London, the benchmark FTSE index was down by 3.9%, while France and Germany, the Cac and Dax were 3.2% and 3.3% lower respectively.
The falls reflect losses in the Asian markets, where South Korea's index fell 5.1% to close at a three-year low.
Other Asian shares fell on fears a US recession would hit the global economy.
On Tuesday evening, the governor of the Bank of England, Mervyn King, warned that Britain was probably entering its first recession in 16 years.
"In the short term, the comments made by Mervyn King highlighting the fact that the economic environment has deteriorated quite rapidly over the past year have sent a shudder through the foreign exchange and equity markets," said Henk Potts, an equity strategist at Barclays Wealth.
"There's been a housing slump, the labour market has been suffering and business confidence has been hammered - it's no surprise that investors are spooked," he added.
Stocks were also dragged down by commodity stocks tracking weaker oil and copper prices.
On Tuesday, Wall Street's Dow Jones index sank 2.5% after several US firms reported weak earnings figures.
The firms, such as Caterpillar and DuPont, were also cautious about their prospects.
In early afternoon trading, the FTSE index was down 166.34 points, or 3.93%, at 4063.39 points. The Cac 40 was also down, shedding 114.09 points, or 3.28% to 3361.31 points, while the Dax slumped 161.70 points, or 3.38%, at 4622.71 points.
Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said attention had turned from a banking crisis - which was now considered to have been largely averted - to the possibility of recession.
"Interest rates are likely to be cut but it won't stop the fact that the UK is likely to go into recession, as the US probably is," said Mr Hunter.
"The question is, how long and deep will it be?"
He said UK GDP figures, due to be released on Friday, were likely to be in negative territory and the market was "steeling itself".
Earlier, Japan's benchmark Nikkei fell 631.56 points, or 6.8%, to close at 8,674.69 - its biggest one-day loss in percentage terms since last Thursday, when it fell 11%. The broader Topix index fell 7.1% to close at 889.23.
The Korea Composite Stock Price Index closed at 1,134.59 points, the lowest close since early autumn 2005, and had touched a low of 1,095.56 earlier in the day.
In other Asian markets, Singapore's benchmark index fell 5% to a four-year low, as banking and property shares slid on worries the global economy is heading for a recession.
Similar concerns pushed the share index in Australia down 3.4%.