World stocks and commodities tumbled today as weak data from China crystallised investor fears of a global recession one day after a grim economic outlook from the US Federal Reserve.
Stocks tumbled more than 4 per cent and commodities took a beating. The US dollar climbed to a seven-month high against major currencies as investors fled risky assets.
In Ireland, the Iseq index of leading shares closed down 3.2 per cent or 78.39 points to 2366.13. Elsewhere in Europe, the FTSE 100 closed down 4.6 per cent while the German Dax and the French CAC40 bourses closed down 49. per ent and 5.2 per cent respectively.
US stocks closed sharply lower after investors sold stocks with abandon, convinced that the US and the world are headed for a new recession.
The Dow Jones industrial average fell as much as 527 points, the second consecutive rout since the Federal Reserve announced a change in strategy for fighting the economic slowdown.
At the close of trading, the Dow was down 391.01 points, or 3.5 per cent, at 10,733.83. The Standard & Poor's 500 index fell 37.18, or 3.2 per cent, to 1,129.58. The Nasdaq composite fell 82.52, or 3.3 per cent, to 2,455.67.
Nineteen stocks fell for every one that rose. Trading volume was high on the New York Stock Exchange, at 6.9 billion.
Oil and metals prices, which rely on economic demand, sank. Traders sought the safety of Treasury bonds.
Overnight in Asia, Japan's Nikkei ended down 2.07 per cent.
Thursday's market meltdown came after weeks of worries that Europe's debt crisis could freeze the global financial system, and a day after the Federal Reserve disappointed markets with its latest effort to boost the economy by lowering long-term borrowing costs. The Fed also spooked investors with a particularly stark assessment of the US economic outlook.
World stocks as measured by MSCI hit a 13-month low and were last down 4.7 per cent, bringing the year-to-date loss to 16.3 per cent.
The decline also came amid concerns that the US government is headed for another budget fight. The House of Representatives unexpectedly defeated a bill that would fund the federal government past the end of September.
The Fed's statement that the US economy faces "significant downside risks" and worry that the US central bank's $400 billion program would be insufficient to jump-start growth brought fears of another global recession to the forefront.
Investors, already worried about a possible Greek debt default and the euro zone's intractable debt crisis, see governments unable to respond to the problems.
IMF managing director Christine Lagarde warned today the global economy has entered a dangerous phase and that nations must work together to meet the growing risks.
"The current economic situation is entering a dangerous phase," said Mrs Lagarde at a news conference kicking off the annual meetings of the 187-nation IMF Fund and its sister lending organisation, the World Bank.
Ms Lagarde said the European Central Bank must continue to provide "solid, reliable" funding for euro zone economies.
Elsewhere, US treasury secretary Timothy Geithner said Europe will act "with more force" to combat a sovereign-debt crisis that is threatening global growth.
"You are going to see them act with more force in the coming weeks and months," Mr Geithner said at a National Journal event in Washington today. "
It's a difficult challenge to do because it's not just about financial support," he added.
Additional reporting: Agencies
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