London's blue chip FTSE 100 index saw one of the biggest early drops, opening around 100 points or nearly two per cent off and then falling further, against a background of tumbles in Wall Street and Tokyo overnight.

Dollar/mark slipped through a technical support level of 1.6650 marks in early trading in step with the December S&P 500 futures contract, which was down 9.80 points and pointing to further falls in US stocks.

Against the yen the dollar fell to a one-month low below 118, down from around 120 late on Wednesday, and against the Swiss franc the dollar was also trading at a one-month low at 1.3625, down from around 1.37 on Wednesday. Economists said equities concerns rose after the lower house of Brazil's Congress rejected a key government bill, pushing back pension reform and raising worries Brazilmay not meet conditions for an International Monetary Fund aid package, underlining continuing problems in other emerging markets.

In London dealers said a wave of uncertainty over world economic well-being was washing through European markets. A gloomy forecast plus more layoffs at Boeing Co and a weak Christmas sales outlook for giant retailer Sears, Roebuck & Co continued to spook markets worldwide and dealers said the news would weigh heavy on the London market.

"It's a grim looking world out there - Russia, Asia and Brazil are all coming back to haunt us," said one dealer. "The only reason we are not dropping further is that there's still liquidity about and people are still trying to find a home for cash," said one dealer. An escalating row in the European Union over proposals for EU members to give up their veto on tax decisions also unsettled UK investors. "It's all adding to the misery," said the dealer.

Profit warnings from Reed and London International Group also damaged sentiment while RoyalBank of Scotland said greater uncertainty lay ahead.

In Paris the key CAC-40 index was off more than one per cent shortly after the bourse opened. "The US is down again, dollar is weak, oil prices are at all-time lows and we've had a miserable third-quarter GDP figure from Japan - I don't see anyone worried about getting back in to the market too quickly, and that's going to lead to volatility," said one senior Paris trader.

One focus was drug major Sanofi, which said it planned to merge with Synthelabo. In Frankfurt, the Xetra DAX index was more than two per cent down in early trade trade despite favourable third-quarter German GDP figures and strong results for sportscar maker Porsche. Overnight the Dow Jones Average lost 69 points to 9,064.54 following the one-two punch of Sears and Boeing and after a late bounce from a loss of nearly 180 points.

In Tokyo too, stocks ended lower in thin trade as falls in S&P 500 stock futures triggered renewed concerns over global equity markets. The Nikkei endeddown 289.54 points or 1.93 per cent at 14,697.08. Japanese falls were reflected in trading in Hong Kong but the Hang Seng index recovered somewhat in late trade and ended flt.

Currency traders said the dollar's drop against the yen to its lowest since November 6 was particularly pronounced because of market talk that European central banks were interested in buying yen against European currencies to boost their reserves of yen.