European markets took a battering, with the main bourses shedding 23 per cent as Wall Street opened weaker following a surprise negative performance on Monday.
Information technology and computer services stocks mirrored overnight losses on the Nasdaq composite, losing 6.4 and 5.8 per cent.
The key cyclical sector of construction was the most resilient, posting a 0.8 per cent gain.
The FTSE Eurobloc 100 index, covering leading companies in the euro zone, closed 26.69 or 2.5 per cent lower to 1,041.41. The FTSE Eurotop 100, covering countries inside and outside of the monetary union fell 79.90 to 2,944.38 while the broader FTSE Eurotop 300 settled 30.61 lower to 1,276.86.
Paris retreated a sharp 126 or 2.9 per cent to 4,253.27 on the CAC-40, underperforming other European markets as Wall Street resumed trading weaker.
Technology stocks bore the brunt of the sell-off, tracking their Nasdaq-listed peers. STMicroelectronics was off €8.15 or 7.9 per cent to €95.15 while Cap Gemini shed €9 or 6.7 per cent to €126.20 and Bull retreated 30 cents to €5.80.
France Telecom weakened on the planned Telecom Italia-Deutsche Telekom link-up despite reports that negotiations between the two were stalled. Shares in the carrier were €3.30 off to €73.20, while Alcatel shed €9.30 to €119.
Rhodia pared most of last week's gains, ending €1.95 off to €17.55 as enthusiasm for cyclicals turned selective. Saint-Gobain, however, extended its recent run to finish €7.20 higher to €170.70 as banks upgraded their recommendation.
Frankfurt shed 3 per cent on the Xetra DAX index, which ended off 150.99 at 5,101.41 after touching a low for the session of 5,082.21.
Telecoms, an uneasy market lately as a result of the investor shift from growth to cyclical stocks, faced a barrage of selling as brokers turned less positive and merger hopes faltered.
As Deutsche Telekom's hopes of merging with Telecom Italia hit political snags, ABN Amro moved from overweight to neutral on the European sector and WestLB Panmure cut earnings estimates at Mannesmann.
Deutsche Telekom shed €1.30 to €36.60 and Mannesmann fell 1.95 to 117.70. Insurers were also weak. Allianz lost €12.30 at €290 and Munich Re €11.30 at €180.10. Pulled lower by the overnight slide for US techs, SAP gave up €16 at €273.
