European stocks were sharply down in early trade after concerns about a trade war and higher US bond yields stoked global investor concerns.
In London, the FTSE 100 index of leading UK shares opened down 1.6% at 7,030.
Markets in Asia had plunged to a 19-month low after US shares suffered their worst losses in eight months.
The global sell-off came as IMF head Christine Lagarde said stock market valuations have been “extremely high”.
In Paris, the Cac 40 share index was down 1.2% at 5,124 points, while in Frankfurt the Dax index fell 0.9%.
The FTSE 100 and the Cac 40 have fallen to their lowest levels since April, while the Dax is at its lowest since February 2017.
Markets in Asia had followed US stocks, which slumped on Wednesday.
Japan’s benchmark Nikkei 225 dropped 3.9%, its steepest daily drop since March. In China, the Shanghai Composite fell 4.9% to its lowest since 2014.
Why are the markets falling?
by Dominic O’Connell, BBC Today business presenter
For the past year, stock market experts have been predicting a big fall. It was something of an obvious forecast; most markets are at or near all-time highs, particularly in America, where investors have enjoyed the longest bull run ever.
What goes up must come down – the only question was the timing. In the last year, there have been even more signs of so-called “melt-up” phase of a bull market, where share price increases are concentrated in just a few very large companies. Apple, Facebook, Google and Amazon have accounted for most of the increase in the US markets in the past 12 months.
The trigger for the latest fall has been a sudden flight from American government debt.
Investors have started to sell down US government bonds – the IOUs it issues to fund its deficit – thinking that they are no longer a good value investment. This has in turn triggered a bout of realism on the stock market.
Worries about a trade war have added to this new mood of caution, and it is worth noting that yesterday several big US companies warned that tariffs on Chinese imports were starting to hurt their business.
One oddity of this particular market drop; traditional safe havens, like gold and, perversely, US government debt, have hardly moved in price. This suggests investors are uncertain of what next – a big fall or another rally – and are happy to sit on cash.
Trump attacks ‘crazy’ Fed
US markets have done better than expected this year, bouncing back after turmoil early in the year to set new records over the summer.
But the Federal Reserve is raising interest rates, with the latest hike coming last month, and more increases are likely to come.
The Fed last month abandoned its description of its policy as “accommodative”, reflecting a view that the economy is strong enough not to need the kind of stimulus it received in the after-math of the financial crisis.
The prospect of dwindling US stimulus has been compounded by a trade war between the world’s two largest economy – which the IMF has warned could harm growth.
US President Donald Trump has been particularly critical of the Fed’s rate rises, breaking with tradition in the US where presidents are expected to respect central bank independence.
“The Fed is making a mistake,” he told reporters on Wednesday. “I think the Fed has gone crazy.”
However, analyst Michael Hewson of CMC Markets said it was “too simplistic just to blame the Federal Reserve” for market turmoil.
“There are a number of factors,” he said. “Obviously, concerns about slowing growth – the IMF downgraded its global growth forecast for the global economy, citing emerging market concerns,” he said.
Mr Hewson added that trade tensions between China and the US had weighed on Asian markets for most of this year, while trade tensions between the US and the EU had hit European markets. Concerns about the political situation in Italy were also adding to market nervousness.