Stocks in the United States plunged to their lowest close in five and a half years on Wednesday after the Federal Reserve acknowledged the risk of a long recession.
The Fed has sharply cut its outlook for the US economy for 2009.
The Dow Jones industrial average tumbled 427.47 points, or 5.07%, to 7,997.28.
Standard & Poor's 500 Index fell 52.54 points, or 6.12%, to 806.58. The Nasdaq Composite Index lost 96.85 points, or 6.53%, to 1,386.42.
It was the first time the Dow closed below the 8,000 level since March 2003.
Trading volume was active on the New York Stock Exchange, with about 1.64 billion shares changing hands. About 2.36 billion shares were traded on the Nasdaq.
Minutes from the Fed's most recent policy meeting also showed some officials believe even more interest rate cuts may be needed.
The Fed cut its fed funds rate to 1% from 1.5% last month. The benchmark rate for overnight bank loans is down 3.25 percentage points since the beginning of the year.
Earlier, European stocks closed at their lowest since May 2003.
The FTSEurofirst 300 index of top European shares closed 4% lower at 811.99 points.
Across Europe: the DAX index in Frankfurt ended at 4,354.09 points, down 225.38 or 4.92%.
In Paris, the CAC-40 index closed at 3,087.89 points, down 129.51 or 4.03%. The Swiss market index closed at 5,524.06 points, down 151.52 or 2.67%.
In Britain, the FTSE 100 closed down 202.87 points, 4.8%, at 4,005.68.