World markets buckled under a frenzied sell-off Thursday as investors panicked the global economy was headed for another slump, one which policymakers may be ill-equipped to prevent.
From New York to Tokyo it was a brutal day for investors as countless billions of dollars were wiped off the value of companies globally.
The 30 firms that make up the Dow Jones Industrial Average alone lost $103 billion of their value -- or around 3.5 percent -- while major indexes in Europe, Asia and Latin America commonly suffered losses of around five percent.
The seeds for the turmoil appear to have been planted Wednesday, when the Federal Reserve warned an already tepid US recovery faces serious risks, even as the bank appears to be running low on policy remedies.
"It's the ever-increasing threat of another recession that is really spooking investors," said analyst Simon Denham at Capital Spreads.
But concern about the fate of the world's largest economy only heightened long-running fears that key pillars of the global economy are cracking under the strain of debt and slow growth.
The Dow lost 391 points to finish the day at 10,734, a level only seen once in the last year.
London's FTSE-100 index closed down 4.7 percent, Brazil's Bovespa was down 4.8 percent and Hong Kong the Hang Seng closed down 4.9 percent to its lowest finish since July 2009.
As representatives from the world's major economies gathered in Washington for a regular meeting of the G20 and the International Monetary Fund, there were increasing doubts that Europe can overcome political difference and decisively tackle its long-running debt crisis.
"Bad economic news from the United States and Europe, compounded by political paralysis and the risk of a serious policy mistake, continues to roil markets," IHS chief economist Nariman Behravesh and IHS Global Insight economist Sara Johnson told clients.
The heads of the World Bank and IMF warned that Europe and the US risked "suffocating" the global economy if they did not get control of their economies.
World Bank president Robert Zoellick called for action, warning: "The world is in a danger zone."
The IMF's Christine Lagarde said that risks to the global economy had increased, "but there is a way forward, if countries act now, act boldly, and act together."
But across the globe investors voted with their feet, pumping money into perceived safe-haven assets, notably the dollar and US government debt.
The euro fell to its lowest level since January against the dollar, at 1.3462 dollars at 2130 GMT, while the yield on the 10-year Treasury note sunk to a new record low, indicating sky-high demand.
Michael Hewson of CMC Markets said "European markets have plunged today on a trifecta of different factors, starting with disappointment about last night's measures by the Federal Reserve as well as its downbeat assessment of the US economy."
He added that "fears about a slowdown in China on disappointing HSBC manufacturing PMI, which contracted for the third month in a row, and disappointing eurozone, French and German manufacturing PMI's data," also weighed on sentiment.
It was stocks that bore the brunt of that flight to safety.
Tokyo shed 2.1 percent and Shanghai lost 2.8 percent. Argentina's main index tumbled 5.89 percent and Mexico slid 4.82 percent.
Such was the scale of the fear that traders even shunned commodities, which have long been kept buoyant by growth in China and other emerging markets.
Crude oil prices fell more than six percent in New York, or $5.4 a barrel to 80.51 percent.
Even gold, considered a relative safe haven since the 2008 crisis, fell more than four percent.
Sentiment was further damaged by escalating concern over the banking sector in Europe, linked to contagion from the eurozone debt crisis and downgrades by Moody's on three top US banks -- Bank of America, Wells Fargo and Citigroup.
French banks were again hit hard with shares in Societe Generale and Credit Agricole down more than nine percent and Franco-Belgian bank Dexia down more than 11 percent on Thursday.Bank of America fell 5.0 percent while Citigroup was down 6.1 percent.
"Equity markets have been bombarded by bad news after bad and this week looks to have been as bad as any so far," added analyst Denham.