The Australian share market slumped by 4 per cent to its biggest one-day loss since the height of the global financial crisis almost three years ago.
Fresh concerns that the US could be headed back into recession and fears that Europe's debt woes could be spreading to Italy and Spain sent investors to exits.
The fall wiped almost $60 billion from the value of Australian shares today and took the cumulative loss to about $100 billion over the past week.
Local traders followed the overnight lead of the US, where the Dow Jones Industrial Average sank 4.3 per cent, or 512 points, to its worst one-day drop in more than two years.
Australian shares closed at their lowest level since July 2009.
It was the biggest one-day percentage fall since November 20, 2008.
IG Markets strategist Cameron Peacock described the drop as a "bloodbath" that was the result of the anxiety about the European debt crisis spreading to Italy and Spain then colliding with America's debt problems.
"It all came to a bit of a head, that's why we're seeing this global rout at the moment," he said.
"Everyone thought after the (US) debt ceiling issue was resolved that markets would move higher.
"All it really did was focus the markets on some of the structural problems in the US economy."
Mr Peacock said the release of new employment numbers in the US overnight could calm investors if they were positive.
"No one knows what's going to happen, anyone that pretends they do is kidding themselves," he said.
"You get these panic days, people just liquidate portfolios indiscriminately and that's why we're seeing such broad-based losses.
"A lot of companies out there are in stellar financial condition and are doing very well, but the baby gets thrown out with the bathwater as they say."
Here's your guide to the bloodbath.
Why have markets dived?
The carnage centres on ongoing concerns that the US, the world's biggest economy, is sliding back into recession after weak data this week.
This has been compounded by worries that Europe's sovereign debt crisis is spreading to larger countries like Italy and Spain, whose borrowing costs have surged in recent days.
Wall Street's Dow Jones Industrial Average this morning closed down by more than 500 points, or 4.3 per cent with investors plunging into bonds and sending yields lower.
This is the 8th biggest one-day points-drop in its history, and the steepest tumble since the height of the GFC in December 2008.
Sharemarkets around the globe also fell at least 3 per cent and up to 6 per cent overnight with ours following today.
How does this compare to other falls?
This is the biggest one-day fall on the ASX since the 8 per cent drop in October 2008 but not on the scale of the massive 41 per cent drop during the infamous Black Monday crash of October 1987.
The 2008 panic was fuelled by the US sub-prime crisis, the subsequent collapse of Lehman Brothers and instability in the banking industry. Like today's correction, that slide - wiping $180 billion from the ASX in a week - centred on recessionary fears, and signalled the start of the GFC.
The Black Monday decline in 1987 was the largest one-day percentage drop in stock market history. The crash began in Hong Kong and spread west to Europe, hitting the US after other markets had already declined dramatically.
Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached. Computer trading and derivative securities, lack of liquidity, trade and budget deficits, and overvaluation are often blamed.
How does today's market dive affect you?
The exodus of investors means falling superannuation balances, big losses on shareholder investments and a crisis of confidence throughout the economy as nervous consumers stop spending.
What should I do with my shares or super?
Stay calm and think long term, experts advise.
There is no point selling low and then when the market recovers thinking "I’ll get back in" and buy high.
Have a look at how your super is allocated and think about re-jigging your investments to buy shares while they are cheap.
The drop in shares may mean more of your super is in cash or fixed interest, and you can move that into shares and buy at cheap prices.
A consistent, long-term strategy is the best way to minimise your losses, with a bear market a great way to transfer wealth from the impatient to the patient.
Will it affect interest rates?
When the Reserve Bank met this week to make its August rate decision it partially remained sidelined on the instability of global financial markets.
This means today's market shake-up could well bring rate relief for homeowners when the RBA meets next month.
The Reserve warned today that debt crises in Europe and the US could unravel in a disorderly way and drag on Australia's economic growth, hinting rates would stay on hold in the short term.
"Overall, it seems easier to envisage significantly worse outcomes for global growth than it is for significantly stronger outcomes," it said in a statement.
Fresh concerns that the US could be headed back into recession and fears that Europe's debt woes could be spreading to Italy and Spain sent investors to exits.
The fall wiped almost $60 billion from the value of Australian shares today and took the cumulative loss to about $100 billion over the past week.
Local traders followed the overnight lead of the US, where the Dow Jones Industrial Average sank 4.3 per cent, or 512 points, to its worst one-day drop in more than two years.
Australian shares closed at their lowest level since July 2009.
It was the biggest one-day percentage fall since November 20, 2008.
IG Markets strategist Cameron Peacock described the drop as a "bloodbath" that was the result of the anxiety about the European debt crisis spreading to Italy and Spain then colliding with America's debt problems.
"It all came to a bit of a head, that's why we're seeing this global rout at the moment," he said.
"Everyone thought after the (US) debt ceiling issue was resolved that markets would move higher.
"All it really did was focus the markets on some of the structural problems in the US economy."
Mr Peacock said the release of new employment numbers in the US overnight could calm investors if they were positive.
"No one knows what's going to happen, anyone that pretends they do is kidding themselves," he said.
"You get these panic days, people just liquidate portfolios indiscriminately and that's why we're seeing such broad-based losses.
"A lot of companies out there are in stellar financial condition and are doing very well, but the baby gets thrown out with the bathwater as they say."
Here's your guide to the bloodbath.
Why have markets dived?
The carnage centres on ongoing concerns that the US, the world's biggest economy, is sliding back into recession after weak data this week.
This has been compounded by worries that Europe's sovereign debt crisis is spreading to larger countries like Italy and Spain, whose borrowing costs have surged in recent days.
Wall Street's Dow Jones Industrial Average this morning closed down by more than 500 points, or 4.3 per cent with investors plunging into bonds and sending yields lower.
Sharemarkets around the globe also fell at least 3 per cent and up to 6 per cent overnight with ours following today.
How does this compare to other falls?
This is the biggest one-day fall on the ASX since the 8 per cent drop in October 2008 but not on the scale of the massive 41 per cent drop during the infamous Black Monday crash of October 1987.
The 2008 panic was fuelled by the US sub-prime crisis, the subsequent collapse of Lehman Brothers and instability in the banking industry. Like today's correction, that slide - wiping $180 billion from the ASX in a week - centred on recessionary fears, and signalled the start of the GFC.
The Black Monday decline in 1987 was the largest one-day percentage drop in stock market history. The crash began in Hong Kong and spread west to Europe, hitting the US after other markets had already declined dramatically.
Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached. Computer trading and derivative securities, lack of liquidity, trade and budget deficits, and overvaluation are often blamed.
How does today's market dive affect you?
The exodus of investors means falling superannuation balances, big losses on shareholder investments and a crisis of confidence throughout the economy as nervous consumers stop spending.
What should I do with my shares or super?
Stay calm and think long term, experts advise.
There is no point selling low and then when the market recovers thinking "I’ll get back in" and buy high.
Have a look at how your super is allocated and think about re-jigging your investments to buy shares while they are cheap.
The drop in shares may mean more of your super is in cash or fixed interest, and you can move that into shares and buy at cheap prices.
A consistent, long-term strategy is the best way to minimise your losses, with a bear market a great way to transfer wealth from the impatient to the patient.
Will it affect interest rates?
When the Reserve Bank met this week to make its August rate decision it partially remained sidelined on the instability of global financial markets.
This means today's market shake-up could well bring rate relief for homeowners when the RBA meets next month.
The Reserve warned today that debt crises in Europe and the US could unravel in a disorderly way and drag on Australia's economic growth, hinting rates would stay on hold in the short term.
"Overall, it seems easier to envisage significantly worse outcomes for global growth than it is for significantly stronger outcomes," it said in a statement.
