Stock markets in Europe and the United States fell hard yesterday, following earlier losses in Asia, on news of a surprising erosion in US consumer confidence that sparked fears for global recovery.
Exchanges in Europe closed between three and more than five percent in negative territory after the Conference Board, a business research group, said US consumer confidence fell sharply in June after three straight monthly gains.
US share prices were down more than two per cent in early trading on the pronounced turnaround in consumer sentiment, which analysts had not foreseen.
US President Barack Obama nonetheless insisted that US economy was "strengthening" despite weak data but acknowledged there was still "great concern" about the recovery.
"The economy is strengthening, we are into recovery," he said following publication of the Conference Board figures.
"We can't let up," he said of efforts to sustain anemic economic growth after a meeting with his economic team and Federal Reserve chairman Ben Bernanke.
"There is a great concern about the eight million jobs that we lost in the course of this last two years," he said.
At Naroff Economic Advisors, economist Joel Naroff called the consumer report "truly distressing... right in line with the depression that seems to be seeping into the psyches of consumers".
"This report confirms my oft-stated fears that growth during the last three quarters of this year will be quite disappointing."
Deepening the gloom was a report that China's Conference Board economic index rose by only 0.3 per cent in April instead of by 1.7 per cent as originally estimated.
Other data suggested the outlook for Japan's economy was weak after unemployment jumped unexpectedly in May, factory output declined and household consumption fell.
In London the FTSE 100 index lost 3.10 per cent to close at 4,914.22 points while in Paris the CAC 40 gave up 4.01 per cent to finish at 3,432.99. The Frankfurt DAX fell 3.33 per cent to 5,952.03.
Elsewhere Madrid lost 5.45 per cent, Milan 4.44 per cent and Amsterdam 3.46 per cent.
"The market is very nervous and this revision (to the Chinese data) was deeply unsettling as China has become a key link in world growth," said Victoria Stive of Meerschaert Gestion Privee.
In addition, analysts said, European investors remained anxious about the extent of sovereign debt problems in Europe and the financial health of the banking sector.
On Wall Street the Dow Jones Industrial Average was down 2.25 per cent at mid-day at 9,910.51 points and the tech-heavy Nasdaq had shed 2.88 per cent to reach 2,156.61.
Lynn Franco, head of the Conference Board's consumer research centre said "increasing uncertainty and apprehension about the future state of the economy and labour market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence."
"Until the pace of job growth picks up, consumer confidence is not likely to pick up," Franco said.
The grim news from the United States also helped drive down the euro, with traders seeking the safety of the dollar at the expense of the single currency.
The euro in late trade was at $1.2185 against $1.2276 on Monday.
Stocks earlier fell in Asia, with Tokyo sliding 1.27 per cent, as weak Japanese data illustrated the fragile recovery in the world's second biggest economy.
China's stock market tumbled 4.27 per cent.