New York's Dow Jones Industrial Average set the stage for a dramatic day's trading by crashing below the key 10,000 points mark for the first in five months as Wall Street opened.
Adding to the gloom in Europe, the euro also came under renewed pressure on Wednesday as hopes faded of an early cut in European interest rates to help keep the European economy on the path to growth.
Despite a string of positive economic news out of Europe, the common currency slumped below the psychologically important 0.92 dollars in late trading Wednesday sinking to 91.11 cents.
The renewed euro weakness and the slide in share prices is likely to add the pressure on the European Central Bank to follow other world central banks and cut rates.
After a cautiously edging forward in early trading on Wednesday, Europe's leading stock exchanges went into reverse as the day's trading progressed with share market indexes slumping back down to levels last seen in the closing months of 1999.
In a sense the markets on both sides of the Atlantic have been feeling off each other as alarm bells having been ringing among global investors about the outlook for the world economy and corporate profits.
Traders said it appeared that the latest selling wave was driven by panic with Europe's DJ Stoxx 50 Index dropping by about 4.5 per cent in trading on Wednesday.
Also hovering in the background of the current sell-off is the deepening gloom about the prospects for the world's second biggest economy, Japan.
The Tokyo stock market's major index, the Nikkei managed to regain some composure on Wednesday after hitting a 16-year-low on Monday. Technology stocks led the fall in New York with the tech-rich NASDAQ Composite Index tumbling 71.84 points, or 3.57 percent, to 1,942.94.
The NASDAQ slumped four per cent in the first 15 minutes of trading, despite having surged by 4.8 per cent on Tuesday.
Shortly after opening on Wednesday the Dow Jones industrial average dropped 300 points to under 10,000 before climbing back up to 10,055.
By late afternoon European time, the Dow climbed back to 10,121, trimming its loss to about 1.6 per cent, while the NASDAQ recouped some early losses to stand at 2,019.
Europe's leading stock exchange in London extended this week's heavy falls by dropping another 0.7 percent to 5,682 points in trading on Wednesday.
Likewise Germany's DAX also pared back some of its earlier losses before the day's trading came to an end, but the index was still down more than three per cent at 5775 points, consequently well below the critical 6,000 mark.
The DAX crashed through the 6,000 points mark this week for the first time in 15 months.
Paris' CAC 40 index recorded a similar fall of 3.39 per cent to 5,011.15 points.
With investors pulling out of the NASDAQ, there was little respite for Europe's premier high-tech market, the Frankfurt-based Neuer Markt with its key index, the NEMAX 50 continuing to take a hammering on Wednesday.
By late afternoon, the NEMAX 50 had shed 5.35 per cent taking it down to 1,691 points.
Twelve months ago at the height of the global high-tech boom, the NEMAX 50 stood at close to 10,000 points.
(dpa)
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