A fierce sell-off gripped world markets Thursday after a warning by US Federal Reserve boss Janet Yellen over the global economy, while oil fell close to 13-year lows.
Yellen`s warning that global market turmoil and tighter financial conditions posed risks to the US economy, and her pointing to "uncertainty" on China`s yuan policy as a key cause of that turmoil, sparked a renewed sell-off that started in Asia and blasted through Europe to North American markets.
Heading for safety, investors pushed the yen up to a 15-month high at 112.39 yen to the dollar.
Also surging was gold, which gained 4.4 percent to $1,247.00 per ounce, its highest level in a year.
The Tokyo market was closed for a holiday, but Hong Kong stocks tumbled 3.9 percent as investors played catch-up after a three-day break for the Chinese New Year.
The intense selling spilled over into Europe, with London falling 2.4 percent, Frankfurt 2.9 percent, Paris 4.1 percent and Milan 5.6 percent.
In New York, the Dow finished off 1.6 percent and the S&P 500 1.2 percent.
"Overall the mood remains very negative," said David Levy of Republic Wealth Advisors.
"It`s hard to find many signs of positivity or bullishness."Another drop in oil prices also added to the gloom.
In New York, the benchmark WTI crude contract lost 4.5 percent to $26.21 a barrel.
In London, Brent North Sea crude lost 2.6 percent to $30.06 a barrel.
Miners remained under heavy pressure as the commodity price rout continues unabated.
Australian giant Rio Tinto fell 3.4 percent after posting an annual net loss of US$866 million and cancelling its progressive dividend policy, in which shareholders are given gradually higher payouts.
Swiss-based miner Glencore crashed 6.2 percent in London after posting a 6.0-percent drop in fourth-quarter copper output.Banking stocks also had another bad day, as investors increasingly worry both that credit quality is deteriorating and that low or even negative interest rate policies from central banks will damage lenders.
Sweden`s Riksbank decided to cut interest rates to -0.5 percent to fight off deflation.
"Negative interest rates have become a real sore point because of the way they impair banks` ability to do business," said CMC Markets UK analyst Jasper Lawler.
Shares in Deutsche Bank, which jumped more than 16 percent at one point on Wednesday on rumors it may launch a bond buyback to assuage concerns about its financial strength, fell 6.1 percent.
Societe Generale, France`s second-largest bank, warned it would fall short of its earnings targets this year, sending its shares nearly 13 percent lower on the Paris exchange.
Banks were also among the top losers in London, with Barclays plunging 7.0 percent, Standard Chartered 5.1 percent and HSBC 4.8 percent.
In New York, Bank of America lost 6.8 percent, Citigroup 6.5 percent, JPMorgan Chase 4.4 percent and Goldman Sachs 4.4 percent.
Eurogroup head Jeroen Dijsselbloem felt the need to play down concerns, saying that the EU`s single currency area and its banks were stronger than a few years ago.
And in Washington, Yellen also assured that US lenders remain strong due to post-crisis efforts to force them to strengthen capital.