World stocks plummeted again Wednesday, cancelling the previous day's rebound as cracks appeared in Greece's newest bailout plan and rumours spread that France, or its banks, would be hit with a credit downgrade.

The French downgrade was quickly denied, but that did not prevent steep sell-offs across Europe led by bank shares.

The pattern was repeated in the United States where shares of the biggest bank, Bank of America and Citigroup, fell by more than 10 per cent.

Shaken investors headed back to safe havens: gold hit a new record of $1,797.00 an ounce, before dropping back to the $1,790 level; the yen and Swiss franc remained strong -- though moderated by apparent intervention by their central banks -- and US Treasury bond yields were at nearly all-time lows.

US markets closed down more than four per cent, also led by sinking bank shares. The Dow Jones Industrial Average was off 4.6 per cent to 10,719.94; the broader S&P 500 fell 4.4 per cent; and the Nasdaq lost 4.1 per cent.

Earlier, after starting off in the green, Germany's Dax lost 5.1 per cent; France's CAC-40 fell 5.5 per cent and London's FTSE 3.1 per cent.

Shortly before Wall Street opened, panic-selling in banking stocks turned the opening European rally into a rout.

"It was a crazy session. The banking sector hasn't been hit this violently since 2008," Renaud Murail, asset manager at Barclays Bourse in Paris said.

Brazil's Bovespa was one of the few bright spots in the markets world, adding 0.5 per cent, while Mexico's market lost about 0.5 per cent.

Europe's revived sovereign debt worries dominated the news, amplified by a Fitch downgrade of Cyprus and comment that the eurozone nation would need an EU bailout.

Greece stoked the fire when an official said that the term for the exchange of bonds under its new rescue plan might have to stretch out beyond 2020 -- longer than had been planned -- and that the swap procedures had not yet begun.

That would hit banks and insurers that had already agreed to an effective haircut on their Greek bonds --- including French banks and insurers who have agreed to reschedule 15 billion euros' worth of Greek debt.

In the United States, worries about the stalling economy appeared to overcome Tuesday's buying spree, which was spurred by the Federal Reserve announcing it would keep interest rates at ultra-low levels for two more years to boost growth.

Top economic policy-makers, including Fed chairman Ben Bernanke and Treasury Secretary Timothy Geithner, met with President Barack Obama Wednesday to discuss both the domestic and global economy, with a White House statement saying they specifically talked about the situation in Europe as well.

In a symbolic shift in the US markets, oil giant ExxonMobil was dethroned as the world's biggest company by market capitalization for the first time at the market close by technology darling Apple, which has proven to be one of the US markets' anchors in recent day.

The iPhone and iPad maker had a market value of $342.4 billion, surpassing ExxonMobil's $338.3 billion -- which fell with oil prices.

In forex markets the dollar was mostly slightly stronger.

At 2145 GMT the euro had fallen to $1.4168 from $1.4191 a day earlier. The dollar moved to 76.83 Japanese yen from 76.45 yen; the pound moved to $1.6126 from $1.6316.

The Swiss franc meanwhile pulled back from record levels; the dollar bought 0.7270 francs, up from 0.7091.

The euro meanwhile was at 1.0304 Swiss francs, compared to 1.0382 the day before.

channelnewsasia.com