Global markets suffered sharp falls again as investor fears of an economic slowdown were reinforced by a poor set of US data.
The Dow Jones Industrial Average has dropped 246 points or 1.5% by the time European markets closed to 16,068, compared to its recent high of 17,265 reached on 18 September - the day before the record breaking Alibaba float.
In the UK the FTSE 100 closed down 181.04 points or 2.83% at 6211.64, knocking some £46bn off the value of Britain’s top companies.
This is its lowest level and biggest one day fall since June last year. It is also close to the 10% decline from its recent peak on 4 September which would mark an official correction.
Germany’s Dax has dropped 2.5% while France’s Cac is down 3.25%. The Vix volatility index, linked to the outlook for the S&P 500, has jumped 15%, its highest for more than two years.
The latest catalyst was figures indicating the US economy could be the latest to be hit by a global fall in demand. US retail sales fell 0.3% in September, the first decline since January, and worse than the 0.1% decline expected., while producer prices fell by 0.1%, the first decline since August 2013. Meanwhile the Empire manufacturing report for New York fell to 6.17 this month, from 20.5 in September.
This follows weaker than expected inflation data from China, prompting renewed fears of a slowdown there.
Fears of a slowdown in the eurozone, in particular Germany, had already put markets under renewed pressure.
There were also concerns about the European banking stress tests, the results of which of due to be published at the end of the month.
On top of that, there are geopolitical concerns, including protests in Hong Kong, the turmoil in the Middle East and the spread of Ebola.
Greece has also come under pressure, with the Athens market down nearly 7% on fears of new political turmoil.
Meanwhile the flood of cheap money supplied by central banks, notably the US Federal Reserve, which has been propping up the market for a number of years is beginning to be turned off.
Oil has hit a new four year low, down 0.34% at $84.75 a barrel, with an excess of supplies even as demand falters.
But as investors sought havens gold rose $8 to $1242 an ounce, while UK bonds were also in demand. Ten year gilt yields fell to 2.055%, the lowest since June 2013.
This article was written by Nick Fletcher, for theguardian.com on Wednesday 15th October 2014 14.52 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010