The euro STOXX volatility index, Europe's main gauge of market anxiety, saw its biggest spike since the September 11, 2001 atta-cks on the United States.
Keen to avoid further risk, investors are closing their positions in other assets, including the currency market, where a popular strategy has been to sell the dollar against the euro and other currencies seen as benefiting from higher interest rates in the future.
Neil Wilson, senior market analyst at ETX Capital in London, is anxious about the role technology is playing in the rout. We still have a long way to go before they're competitive to the equity market.
USA interest rate markets are now pricing in only two Federal Reserve rate hikes this year, a big shift from only a few days ago when they were pointing to three or even four hikes.
"But that's a healthy development so markets can focus on areas that are generally stronger".
As a result, he thinks that it's entirely possible that this has led to some "complacency", with investors perhaps "getting a little ahead of themselves".
Gold slipped as the US dollar strengthened.
Dubai's stock market closed 1.5 per cent lower and Abu Dhabi's shed almost 1 per cent on Tuesday in the region's third day of trading for the week. They were last at 2.77 per cent.
In the energy market, oil prices fell 2.0 percent.
- While volatility remains high, the latest moves suggest a correction within an uptrend rather than a trend reversal.
Many in the markets think assets like bitcoin are introducing a layer of uncertainty that has contributed to the retreat in stocks.
Rolling world stock sell-off runs to $4 trillion
Copper lost 1.30 percent to $7,075.85 a tonne. "During the selloff you got the natural reaction of bond yields going up but the moment you get some stability, yields zoom up again", Ahmed said.
Investors lose $4 trillion worth wealth in 8 days in global stock market crash.
The Dow Jones Industrial Average fell 19.42 points, or 0.08 percent, to 24,893.35, the S&P 500 lost 13.48 points, or 0.50 percent, to 2,681.66 and the Nasdaq Composite dropped 63.90 points, or 0.9 percent, to 7,051.98.
Wall Street stock indexes repeatedly swung from positive to negative territory during Tuesday's session while the Dow Jones Industrial Average had a more than 1,100-point difference between its intraday high and low. The FTSE 100 index of leading British shares was down 1.8 per cent, while Germany's DAX was 1.9 per cent lower - both indexes are higher than where they started the session.
The equity market selloff had been viewed by some as a healthy correction after a rapid run up over the past year, but as it snowballed through Asia and Europe and looked to be on its way back to Wall Street, ner-ves were starting to fray.
Minutes after the bell to signal the start of trading, the FTSE 100 index of leading British shares was down 2.5 per cent at 7,151, while the CAC 40 in France slid 3 per cent to 5,127.
Gold prices fell 1.0 percent to a 2-1/2-week low.
Investors around the world have taken fright at the prospect of a higher than anticipated increase in USA interest rates this year in the event rising wages stir inflation.
On Wall Street, all but two S&P 500 index sectors ended higher, with economically sensitive materials, technology and consumer discretionary indexes posting the biggest gains.
Wall Street's Dow Jones and S&P 500 benchmarks had slumped 4.6 per cent and 4.1 per cent on Monday, their biggest drops since August 2011.
The 10-year US Treasuries yield rose to as high as 2.885 per cent on Monday, its highest in four years and up 47 basis points since the end of 2017. The spot gold price was well down from its late-January highs while the Japanese Yen and the Swiss Franc were more stable after the drops in USDJPY and USDCHF earlier this year.
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