In London, markets fell as investors continue to worry about a recession in the US, with the FTSE 100 falling 83.3 points (1.42%) to 5,801.
Smith & Nephew led a small group of gaining shares, adding 5 points (0.76%) to 660.5p, while Compass Group climbed 2.25 points (0.69%) to 328.75p.
Man Group shares fell 23 points (4.14%) to 532p, while Cairn Energy dropped 110 points (4.05%) to £26.07.
In Wall Street, share values plunged as economic data showed consumer spending was being constrained by higher food and fuel prices, an the Dow Jones lost 315.79 points (2.51%) to 12,266.39,
AIG saw the biggest losses as the financial sector continued to suffer on the back of the sub-prime crisis and the firm announced its biggest quarterly loss in its entire history. The $5.29bn loss sent shares down 3.29 points (6.56%) to 46.86. Alcoa shares dropped 1.98 (5.06%) to 37.14, while General Motors dropped 1.22 (4.98%) to 23.28.
In Tokyo, markets dropped as the US sub-prime crisis began to spread to Japanese lenders and the Nikkei 225 lost 610.84 (4.5%) to 12,992.18.
Takefuji Corp, the third largest consumer credit company in Japan, saw shares fall 6.6% to 2,490 yen, after the firm announced it could lose up to 30bn yen on derivatives transactions.
Nintendo also lost value as it feared the US market for its Wii console might dry up and shares dropped 5.8% to 50,200 yen.
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