Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down a massive 10.76 percent, France's CAC40 was down 10 percent, while Britain's FTSE 100 was 8.67 percent lower after third quarter GDP fell 0.5 percent, putting the country on the brink of recession.

The dour outlook convinced investors that the world economy is headed for a long and severe downturn despite a raft of government rescue efforts aimed at pulling the financial system from the brink. It also indicated that the tremors caused by the global credit crisis may have only begun to be felt in their true scope and magnitude.

Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse in a bid to reduce risk and raise cash - moves that only intensify the selling.

Ahead of the market's open, Dow Jones industrial average futures fell the maximum allowed limit of 550, or 6.27 percent, to 8,224. That triggered circuit breakers that automatically freeze selling until the market's 9:30 a.m. open. However, traders can still buy stocks and send the market higher. Selling eased slightly later in the morning, leaving Dow futures 548 points lower.

The Standard & Poor's 500 index futures also was down the maxium allowed 60 points, or 6.56, to 855.20, and the Nasdaq 100 index futures was down 85.00, or 6.20 percent, to 1,175.75.

Yesterday, the Dow rose 172 points as investors went looking for bargains after two days of selling. Analysts have predicted that trading will remain volatile for the foreseeable future while investors test whether or not the market has hit a bottom.

The sudden gloom over growth expectations is having the added impact of putting small economies and currencies under extreme pressure. Investors are pulling money out of countries in eastern Europe, Latin America and Asia on fears vulnerable countries will not only be hit hard by the financial crisis but may also default on debt.

In Europe, for example, Hungary, Ukraine and Belarus are all, like Iceland, in talks with the IMF to discuss possible loans.