World stock markets fell sharply on Wednesday afternoon amid concerns for the US and eurozone economies.
The Dow Jones in New York (Frankfurt: A0DKRK - news) dropped 1.3% on opening - and fell over 2.4% in morning trading - in its first trading session since the re-election of President Barack Obama was confirmed.
Market analysts suggested there was concern among investors that he would struggle to thrash out a budget deal with a divided Congress with the looming so-called 'fiscal cliff' the most pressing problem.
A combination of higher taxes and government spending cuts will automatically take effect unless Congress agrees a new budget by January 1.
Economists warn that a failure to reach a concrete decision will push the world's largest economy back into recession.
The other major factor in the market falls was economic growth forecasts from the European Commission (EC) which were revised down on previous predictions.
The EC said it now expected GDP in the 17-country eurozone to contract by 0.4% this year and to grow by only 0.1% next year.
There was also bad news in the report for Britain in that it suggested UK output would decline by 0.3% in 2012.
The FTSE 100 closed down 1.58%, while the falls were steeper on the continent.
The turnaround in stocks markets was evident in currencies too as the euro lost ground against the dollar, trading a full cent lower.
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