World stocks tumbled on Wednesday after poor US retail sales data provided fresh evidence that global efforts to restore confidence in the financial system will not be enough to stave off a deep recession.
Wall Street followed Europe and most Asian stocks in heading lower. The selling picked up steam in the last hour of trading in New York, dragging Latin American stocks to steep losses.
The Dow industrials ended off 733.08 points, or 7.87 percent, at 8,577.91. Wednesday's percentage drop was the biggest since Oct. 26, 1987, which followed Black Monday, the Oct. 19 crash that sent the blue chips down 22.6 percent in a single session.
The renewed selling pressure was stoked by a report showing U.S. retail sales plunged in September by a monthly 1.2 percent, almost double the 0.7 percent drop analysts had expected.
Japan's key stock index has plunged more than 10 percent in early trading on Thursday following the Wall Street dive. The benchmark Nikkei 225 stock average nose-dived a staggering 986 points, or 10 percent, to 8,562.
"We are back now worrying about the impact of world economy on markets ... and the continued falls suggest that markets are bracing themselves for a long and deep recession," said Jeremy Batstone-Carr, heard of research at Charles Stanley in London.
In Latin America, Brazil's Ibovespa stock index sank 11.4 percent to 36,833. The sell-off triggered an automatic 30-minute suspension of mid-afternoon trading.
Vale do Rio Doce, the world's largest iron ore mining company, lost 15.2 percent, while state-run oil company Petrobras fell 12 percent as crude hit a 13-month low. Together, the two companies comprise 34.5 percent of the Ibovespa.
Elsewhere, Mexico's benchmark IPC index fell 5.2 percent to close at 21,097 as the government began an investigation into publicly listed companies that may have failed to report purchases of highly speculative currency derivatives.
Argentina's Merval index plunged 12.2 percent to 1,186 while and Chile's IPSA index dipped 0.4 percent to 2,432. Colombia's main IGBC stock index fell 6.4 percent to close at 7,667, erasing most of the previous day's gains.
Earlier, the FTSE 100 index of leading British shares closed down 314.62 points, or 7.2 percent, at 4,079.59. Germany's DAX ended 337.56 points, or 6.5 percent, lower at 4,861.63, while France's CAC-40 was 247.45 points, or 6.8 percent, down at 3,381.07.
Fears about the outlook for the world economy have overtaken the relief the markets breathed at the start of the week on the unveiling of a series of bank rescue packages from governments around the world.
On Tuesday, the U.S. government followed Europe's lead and announced it will pump some $250 billion into shares of its leading banks, including JP Morgan Chase & Co., Bank of America Corp., Goldman Sachs Inc. and Citigroup Inc.
The long-term key is whether the flurry of activity can actually break the logjam in credit markets and the early indications are that there has been some easing in rates and spreads, with further declines Wednesday.
The interbank lending rate for three-month dollar loans fell 0.09 percent to 4.55 percent, while the three-month Euro Interbank Offered Rate, or Euribor, fell almost 0.067 percentage points to 5.168 percent.
Though the rates are falling, the differential between the rate at which banks lend to each other and official central bank lending rates remain high, signaling a strong degree of mistrust still exists. In the U.S. the base central bank rate is 1.5 percent, in the euro area it is 3.75 percent and 4.50 percent in Britain.
Even if lending rates between banks continue to respond to the packages announced by governments around the world — Greece became the latest Wednesday when it unveiled a 28 billion euro ($38 billion) bank rescue plan — they will do nothing to prevent a serious economic slowdown.
"Although money markets are thawing and banks expect to benefit from greater access to Treasury funds, lending rates to businesses and individuals will take longer to ease," said Kim Forkes at Moody's Economy.com in London.
The economic concerns were highlighted Wednesday in Britain with the news that unemployment rose by another 164,000 between June and August, to 1.79 million. The biggest rise since 1991 took the official unemployment rate up to 5.7 percent from 5.2 percent in the previous quarter.
And in Iceland, the central bank slashed its interest rates by 3.5 percent, bringing the policy rate down to 12 percent from a record high of 15.5 percent as the country struggles to deal with the impact of the global credit squeeze because of its heavyweight banking sector.
Concerns about the global economic outlook are also clear in the price of oil. Light, sweet crude for November delivery fell $4.09, or 5.2 percent, to settle at $74.54 a barrel on the New York Mercantile Exchange. It was crude's lowest settlement prices since Aug. 31, 2007.
Resource issues have also taken a hit on worries about slowing demand. Shares in Posco, the world's fourth-largest steelmaker, lost almost 8.7 percent in South Korea, while BHP Billiton Ltd, Australia's largest oil and gas producer, sank more than 4 percent.
Earlier in Asia, Hong Kong's Hang Seng Index lost 834.58 points, or nearly 5 percent, to close at 15,998.30 after rising more than 13 percent the previous two days. Markets in Australia, South Korea, China, India and Singapore also sank.
Japan's Nikkei 225 index bucked the trend, however, ending up 1.1 percent at 9,547.47. The benchmark soared 14 percent in the previous session — its biggest single-day gain ever.
In Hong Kong, Chief Executive Donald Tsang said the meltdown was even worse than the 1997 Asian financial crisis and would take a far bigger toll on the global economy.
Major exporters such as Japanese automakers slumped due to concerns over the U.S. economy, a vital market for Asian goods. Honda Motor Co. shed 5.23 percent, and Toyota Motor Corp. lost 1.88 percent.
In the currency markets, the 15-nation euro fell to $1.3521 in late Wednesday trading in New York from $1.3650 after two days of gains against the dollar. Meanwhile, the dollar fell to 100.79 Japanese yen from 101.88 yen, as the Japanese currency rose strongly across the board.
The British pound also fell to $1.7328 from $1.7437.