Global equity prices plunged yesterday on renewed worries about the US subprime mortgage sector, with the foreign exchange market and oil trading also affected.
US and European markets were sharply lower on mounting credit fears after the ECB pumped up money supply to European banks and a French bank suspended three funds in moves linked to high-risk "subprime" property loans in the US.
"Given the kind of state of the market, you only have to mention subprime for people to start panicking," said analyst Millan Gudka at investment bank Dresdner Kleinwort.
The Dow Jones Industrial Average opened down 1.01 percent at 13,520.40 points, the NASDAQ composite slumped 1.62 percent to 2,570.54 points and the broad-market Standard & Poor's 500 index shed 1.18 percent to 1,479.81.
The European Central Bank said yesterday it had injected a record 94.8 billion euros (US$130.2 billion) into the eurozone money supply to help banks shaken by the US subprime mortgage crisis.
That was more than the bank pumped in after the September 11, 2001, attacks rattled world financial markets.
There are growing jitters about the potential fallout from problems in the US subprime lending sector, where mortgages are provided to people with poor credit histories.
That, in turn, could affect private equity groups because their takeover bids are often financed by large amounts of bank debt.
In late European trade, London's FTSE 100 index of leading blue-chip shares showed a loss of 2.39 percent to 6,241.20 points.
Frankfurt's DAX 30 shed 2.15 percent to 7,442.14 points and in Paris the CAC 40 dropped 2.47 percent to 5,607.17.
European and US markets had rallied on Wednesday.
In Paris yesterday, the share price of BNP Paribas dived 6.14 percent to 80.20 euros after a unit of the French bank said it had suspended three of its funds amid concerns sparked by the crisis in the US subprime mortgage market.
BNP Paribas Investment Partners said it had suspended the funds Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, adding that it would accept no redemptions or subscriptions until further notice.
Other major European banks, from Barclays in London to Commerzbank in Frankfurt, saw their share prices plummet in yesterday's trade.
Meanwhile dealers in Hong Kong said share prices there closed lower yesterday as caution re-emerged in late trade after the announcement by BNP.
Stocks had advanced significantly, but trading changed course when the news about BNP hit the market, wiping out the day's gains.
Hong Kong's key Hang Seng Index closed down 0.43 percent at 22,439.36 points.
BNP's move follows a similar decision last Friday by the German mutual fund Union Investment which froze one of its funds that has exposure to the US subprime market.
Ahead of the BNP announcement, Japanese share prices closed higher on Thursday. The Tokyo Stock Exchange's Nikkei-225 index of leading shares rose 0.83-percent to end at 17,170.60 points.
Chinese share prices gained, extending their record-breaking performance to a fifth day.
Meanwhile in European foreign exchange deals, the US dollar fell against the yen.
"Markets are taking this latest news seriously with the risk appetite on the back foot," said David Corbell, analyst at IFR Markets.