European stock markets plummeted further on Tuesday following a sharp rise in Chinese inflation, adding to woes over debt contagion across the eurozone and fears of another US recession.

Market volatility reached its peak when Britain’s FTSE 100 index, which traded 20 percent below its February peak of 6091 points, plunged officially into bear territory as analysts watched global stocks plummet.

The Dow Jones Industrial Average lost 634.76 points, or 5.55 percent, to 10,809.85, while the Nasdaq composite slumped 174.72 points, or 6.90 percent, to 2,357.69.

Volatility commenced after the Dow dropped 634 points or 5.5 percent following Standard & Poor’s announcement late on Friday that it downgraded US credit from AAA to AA+.

US financial stocks, including that of Bank of America, which saw stocks fall 20.32 percent, were also hit as they suffered their worst one day share sell-off in over two years.
 
Gold surpassed the $1,700 barrier in trade and was seen to reach as high as $1,721 and as low as $1,681, while the gold spot price per ounce rose $53.60 to $1,717. Traders dug into the metal’s safety net as crude oil prices dipped over fears of a double dip recession.
 
The US Federal Reserve announced a policy meeting for later in the day as most UK news agencies reflected on overnight civil unrest leading to further market volatility.