US, Europe stocks plunge after brief recovery

US and European shares plunged on Wednesday after a rise earlier in the day. France denied rumours that a ratings agency had downgraded it.

Reuters/Tyrone Siu

European markets tumbled early Wednesday afternoon:

Paris fell 4.0 per cent;
Milan slumped by more than 6.0 per cent;
Madrid fell 4.7 per cent;
Zurich was down 3.02 per cent;
London was down 2.3 per cent;
Frankfurt was down 4.14 per cent.

As Wall Street opened, the Dow Jones index fell more than 3.6 per cent, while the S&P 500 was down 3.5 per cent and the Nasdaq dropped 3.4 per cent.

Having followed Asian markets up in the morning, Europe’s markers slumped in the afternoon, amid fears that the eurozone crisis was widening to expose French banks exposed to Greek debt.

Shares in French bank Société Générale plummeted 20 per cent.

The French finance ministry “categorically denied” that a credit ratings agency had downgraded France. Officials insisted that all three agencies had assured them that there was no risk of that happening.

President Nicolas Sarkozy ordered ministers to draw up plans to avert a ratings downgrade on Wednesday morning.