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NEW YORK: Global stock markets reeled on Monday, shaken by massive sell-offs by panicked investors who fear a much-vaunted US finance sector bailout will fail to end a crippling credit crisis.
"There is all-out panic," said ING senior strategist Adrian van Tiggelen.
"Everyone had hoped that after the acceptance of the package in the US and the bailouts in Europe, things would calm down but in effect, there are still strong fears of the domino effect."
On Wall Street, the Dow Jones Industrial Average fell below the key psychological level of 10,000 points for the first time since October 2004. The blue-chip index fell to as low as 9,992 before steadying somewhat.
The Dow was later down 4.02 percent at 9,910.66 points at mid-day.
The slide in the Dow sparked huge losses in Europe, with markets in London, Paris and Frankfurt all plunging between 7.0 and 9.0 percent. Asian exchanges earlier in the day also closed heavily in negative territory.
"There is a crisis of confidence behind the selling interest," said Patrick O'Hare at Briefing.com of the declines on Wall Street.
"Quite simply, there is a reluctance to believe the financial relief plan will produce a quick fix for the global financial system and global economy."
Investors dumped shares after US markets fell sharply on Friday despite US congressional approval of a 700-billion-dollar plan for the government to take on some of the soured US bank debt that has sparked a global credit squeeze.
"Markets are looking ugly around the globe. Investors are voting on the bailout plan with their feet. The crisis is now accelerating," said Barry Ritholtz at Ritholtz Research & Analytics.
European equities were rattled by fresh troubles after a weekend meeting of the leaders of France, Britain, Germany and Italy failed a produce a joint European financial rescue package.
"There's a massive lack of confidence," said Hargreaves Lansdown analyst Keith Bowman.
"The overriding factor is the difficulties we saw in Europe over the weekend.
"Added to that, although we did see the US bailout package voted for successfully on Friday, there are still a number of questions and concerns in terms of its timing and implementation."
The London FTSE 100 index of leading shares fell 7.85 percent to 4,589.19 points while in Paris the CAC 40 index shed 9.04 percent, its heaviest one-day loss since its creation in 1988, to 3,711.98 points.
The Frankfurt DAX lost 7.07 percent at 5,387.01 points. In Dublin the Irish stock exchange's main ISEQ index ended with a loss of 9.59 percent at 3,565.54, with banks taking the hardest hit.
Markets in Amsterdam, Madrid, Milan and Brussels were down between 6.0 and 9.14 percent at the end of the day.
Iceland's stock market suspended trading in all financial shares including three major banks on Monday amid government talks on a possible rescue for the banking sector.
Russia's dollar-denominated RTS stock market suffered its worst-ever one-day fall, closing down 19.10 percent, a spokesman for the bourse told AFP.
"It was the biggest one-day fall" ever, the spokesman said after the index closed at 866.39 points, 65 percent down from an all-time high posted in May this year.
Nordic markets also took a heavy beating.
Some analysts said the financial troubles were spreading, making it harder for government authorities to stop the rot.
"European governments are rushing to the rescue of their financial institutions, which are still stymied by a seizure in bank lending. Problems are being uncovered among the largest US insurers, who are being stung by losses in their investment portfolios," said Chris Lafakis at Economy.com.
"Insurers are now joining financial institutions in the hunt for capital. US equities are haemorrhaging as the problems in the global financial system threaten to drag the world into recession."
European stocks plunged after Germany's fourth biggest bank, Hypo Real Estate, had to be rescued afresh over the weekend - news that helped push the euro to a 13-month low against the dollar on Monday.
As the US-centred financial crisis takes a stronger grip in Europe, the German government agreed an emergency rescue package of 50 billion euros (68 billion dollars) for Hypo Real Estate late Sunday. It also announced an unlimited guarantee for personal savings deposits.
"There was great expectation that finance ministers and heads of government might come away with something more concrete as far as a package for Europe was concerned and that certainly did not materialise," said Bowman of the weekend meeting.
"Things took a turn for the worse with the German government looking to reassure investors with a complete (bank deposit) guarantee across the board and if anything that was against the tone of the meeting itself.
"Investors have lost some confidence because events in Europe at the moment still look very difficult."
France's BNP Paribas meanwhile announced Sunday that it was taking control of the operations of ailing financial group Fortis in Belgium and Luxembourg.
In an effort to keep credit flowing, global central banks pumped billions of extra dollars into short-term lending markets in what has become a daily effort to keep cash moving in a critical network.
Markets were looking ahead to a meeting on Friday of finance chiefs from the Group of Seven rich nations, waiting for any announcements on coordinated action such as liquidity injections or interest rate cuts, dealers said.
A speech on Tuesday by US Federal Reserve Chairman Ben Bernanke would also be closely watched for any clues on the possibility of a US interest rate cut. - AFP/de
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