LONDON: Stocks tumbled Wednesday on growing concerns about emerging market economies, adding to the uncertainty stoked by US President Donald Trump's trade rows with China and Canada.
"Risk aversion remains at the forefront of the current market sentiment," said Lukman Otunuga, a research analyst at FXTM.
European stocks were up to one percent lower, matching Tuesday's losses, while Wall Street again failed to lend any support at the opening bell when the Dow index posted modest losses.
After Turkey and Argentina's recent headline-making problems, South Africa became the latest EM country to spark panic with data showing a shock plunge into recession for the one-time economic starlet.
The news sent the rand sliding in a similar way to the Argentine peso and Turkish lira in recent weeks.
"South Africa is back in recession and that was not expected," said Greg McKenna, chief market strategist at AxiTrader.
Observers fear the problems could spread to other EM countries and possibly spill over into major economies.
"Stock markets are lower across the board in Europe as trade tensions and concerns about emerging market currencies weigh on sentiment," said David Madden, analyst at CMC Markets UK.
- Tipping point -
"Asian equity markets saw a severe sell-off as there is speculation that President Trump will step up the trade spat with China by announcing more tariffs."
The brewing EM crisis has seen currencies in a number of emerging markets -- in particular those with deep current account deficits -- take a hammering.
"It has certainly been a terrible trading week thus far for most major EM currencies as investors begin to compare the ongoing pressure in EM currencies to the 1997 Asian financial crisis," said Otunuga at FXTM.
India's rupee was sitting at a record low and the Indonesian rupiah at levels last seen during the 1998 Asian financial crisis.
Indonesia said it would take unspecified action against currency speculators and announced plans to delay import-heavy energy projects to focus efforts on reducing imports and supporting the rupiah.
McKenna at AxiTrader said the "big question" was now whether this was a "a tipping point for EM markets".
- Trade woes, again -
Adding to selling pressure on emerging market currencies is the US economy's continuing strength, which is pushing the Federal Reserve to raise interest rates. This leads investors to seek better and safer returns in the US.
Data showing an index of US manufacturing activity hitting a 14-year high bolstered expectations the Fed will continue to increase borrowing costs. Crucial US jobs data is due out on Friday.
On trade meanwhile, a public consultation period ends this week on Trump's proposal to impose tariffs on $200 billion of Chinese imports, on top of the $50 billion already being hit.
While the two sides have held low-level talks there are fears the measures will be implemented sparking a retaliation from Beijing and pushing the world's top two economies closer to an all-out trade war.
Eyes are also on the resumption Wednesday of talks between the US and Canada aimed at salvaging the North American Free Trade Agreement as a three-country pact.
- Key figures around 1330 GMT -
London - FTSE 100: DOWN 1.0 percent at 7,385.86 points
Frankfurt - DAX 30: DOWN 0.8 percent at 12,111.74
Paris - CAC 40: DOWN 1.1 percent at 5,285.48
EURO STOXX 50: DOWN 0.8 percent at 3,333.18
New York - Dow: DOWN 0.2 percent at 25,900.79
Tokyo - Nikkei 225: DOWN 0.5 percent at 22,580.83 (close)
Hong Kong - Hang Seng: DOWN 2.6 percent at 27,243.85 (close)
Shanghai - Composite: DOWN 1.7 percent at 2,704.34 (close)
Euro/dollar: UP at $1.1617 from $1.1600 at 2100 GMT
Pound/dollar: UP at $1.2937 from $1.2900
Dollar/yen: DOWN at 111.56 yen from 111.45 yen
Oil - Brent Crude: DOWN 83 cents at $77.34 per barrel
Oil - West Texas Intermediate: DOWN 99 cents at $68.88