A host of factors combined to send investors scurrying for the exit doors.
In Europe, the short-selling ban in France, Italy, Spain and Belgium had an extremely negative impact on the German market, which is excluded from the short-selling ban.
Traders looking for short exposure had nowhere to hide except for Germany and they subsequently unleashed hell on the DAX which tumbled a whopping 346 points (-5.8%).
This dragged other European markets lower, with the FTSE slumped 4.5% and the CAC shed 5.5%.
The rout continued heading into the US session, with the Dow belted to the tune of 420 points (-3.7%) after being down as much as 520 points at one point.
The broader S&P 500 (-4.5%) suffered even heavier falls, as did the tech-heavy Nasdaq (-5.2%).
Adding to the European problems was discouraging US economic reports which showed rising inflation and little traction on hiring.
A reading of Philadelphia-area manufacturing plunged to negative-30.7 from 3.2 in July, the lowest reading in two years. Economists had been expecting a gain.
Existing-home sales also slumped 3.5% in July, defying hopes of a gain.
The US dollar gained the most in six-weeks versus a basket of currencies of six major trade partners, amid plunging equity markets.
Elsewhere, the Canadian dollar fell the most in more than a week amid concerns demand for commodities will decline amid a slowing global economy.
Crude oil fell sharply, capping the third largest decline of 2011. The black gold shed US$5.20 to settle at US$82.38 a barrel.
Gold surged to yet another record intraday and closing high, adding US$28.20 to settle at US$1822 an ounce.
In company news, ANZ saw its underlying profit for the nine months to the end of June rise 16.1% to $4.2 billion. The bank remains confident its Asia focus will help it ride out economic problems.
There is no major local data due out for today’s session.