US stocks have plummeted to their lowest in five and a half years. News that politicians were struggling to reach a compromise over a crucial bailout deal to save the stricken car industry increased investors pessimism over the likelihood of prolonged recession.
In addition, US consumer prices dropped by a record 1% in October compared with the previous month, as fuel costs fell for a third month in a row.
The news also contributed to the plunge on Wall Street, with European markets also closing with losses of more than 4 %.
The reduction in consumer prices was the biggest monthly drop in 61 years and also reflected a significant decline in energy prices. This bigger-than-expected fall is being seen as a sign of impending deflation and has raised concerns over an impending recession.