 "World stocks pummelled, dollar slumps as rout gathers pace")
European shares fell sharply in morning trading, dropping 1.3% after the second biggest fall in Japan's Nikkei in over two years left Asian shares at their lowest level of the year.
Heavy selling hit the dollar, which slumped 2% against the yen as investors spooked by the plummeting Japanese stock market unwound hedges. It fell as low as 93.90 yen, its lowest since April 4, giving back almost all the gains made since the Bank of Japan's aggressive monetary easing announced on that day.
The US currency dropped to a 3-1/2 month low against the euro before a slight rebound left the common currency buying $1.3350.
The rout has been triggered by noises from the US Federal Reserve, which meets next Tuesday and Wednesday, feeding into feverish uncertainty about the scaling back of its huge asset purchase programme.
"The trend is still in principle a sell-off in markets, a sell-off in riskier assets on the expectations that the Fed might signal further readiness to maybe slow down the rate of purchases," said Daiwa Securities economist Tobias Blattner.
"So all eyes are on the FOMC meeting next week. There is very little else that matters at the moment"
In the debt market, German government bonds rose 40 ticks as investors headed for traditional safe-haven paper. The recent selling of euro zone periphery debt also resumed as Italy also saw its borrowing costs rise at an of an auction of 3-year debt though yields at a parallel 15-year sale were little changed.
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Tricky transition
US stock futures pointed to Wall Street starting in negative territory again after its recent falls.
Gold saw a second day of minor gains, but there was no sign of any rush to buy bullion, and with oil almost bang in the middle of its recent $100-105 range, commodity markets were largely devoid of the drama going on elsewhere.
Emerging markets were taking another pounding though, a pattern that has taken hold as the uncertainty about central bank stimulus has driven a global dash back to cash and core economies.
Emerging equities fell to 11-month lows and most emerging currencies remained under heavy pressure with the Indian rupee falling to a record low.
The punishing sell-off in Asian markets saw many of them plummet to multi-month lows as investors scrambled to recalibrate positions for a world with potentially reduced liquidity support.
Both the dollar/yen and the Nikkei fell below the Ichimoku cloud bottom for the first time since their rallies began in November, sending a strong bear market signal. The Nikkei also breached its 50% retracement from its November rise.
"If you look at it historically, there has never been a period when the Fed has started to take back stimulus that has left the markets untouched," said Hans Peterson, global head of investment strategy at Swedish bank SEB.
"And this time it is a bigger exercise. We have moved markets from 2009 to 2013 on stimulus and now we are trying to take a step into a world which is more driven by natural growth. That transition will not be easy."