Global stocks: Big corrections on Wall St, Europe

US stocks have plunged as renewed fears for the banking sector and the overall economic outlook sent investors scurrying to lock in gains from a six-week rally.

The Dow Jones Industrial Average slumped 289.44 points (3.56 per cent) at the close this morning to 7,841.89 while the Nasdaq composite tumbled 64.86 points (3.88 per cent) to 1,608.21.

The broad-market Standard & Poor's 500 index slid 37.19 points (4.28 per cent) to a preliminary close of 832.41

Investors shrugged off news that government-rescued Bank of America recorded a profit of US$4.2 billion (A$5.81 billion) in the first quarter, since the result was boosted by one-off gains and the lender set aside more cash to cover possible bad loans.

Global markets fared badly overnight.

Britain's leading share index fell 2.49 per cent, driven by banks after Bank of America reported deteriorating credit quality, while miners tracked softer base metal prices.

The FTSE 100 index closed 101.94 points lower at 3,990.86 - its biggest percentage fall since March 30. It last closed below 4,000 on April 15.

European shares closed sharply lower, with banks taking most points off the index as investors gave the thumbs due to the Bank of America result.

The FTSEurofirst 300 index of top European shares closed 3.5 per cent lower at 786.12 points, the biggest daily percentage drop since March 30. The index has fallen 5.5 per cent so far this year.

In Frankfurt, the DAX index ended at 4,486.3 points, down 190.54 or 4.07 per cent.

And in Paris the CAC-40 index closed at 2,969.4 points, down 122.56 or 3.96 per cent.

- AP