Any brief respite at the start of the trading week looked increasingly like a "dead cat bounce" on Wednesday, with global investors continuing to shun riskier assets like equities.
Major stock indexes in the U.S. lost nearly 1 percent on Wall Street on Tuesday, with Asian stocks following them lower overnight. U.S. equities opened lower on Wednesday, extending losses that have the S&P 500 at two-month lows, but it was in Europe where the pain was felt most.
Major European bourses saw heavy selling with the German DAX trading lower by 1.05 percent by 3:00 p.m. London time. The Dax's intraday low earlier Wednesday marked a more-than 10 percent fall from its intraday high on June 20. Italian and Portuguese stocks were down well over 2 percent, and Greece's tanked nearly 4 percent in the morning session.
Meanwhile, spot gold rose 0.2 percent in morning trade and U.S. Treasurys climbed higher, with the yield on the 10-year falling to 2.4438 percent from yesterday's 2.483 percent.
'Never a bullish sign'
Amid concerns over sooner-than-expected interest hikes by the U.S Federal Reserve, it was actually tensions in Ukraine that set the tone on Wednesday morning.
Heavy fighting has erupted this week in a suburb of the eastern city of Donetsk, as government forces tried to take the area back from pro-Russian separatists. Meanwhile, Poland's foreign minister said on Tuesday that Russia was amassing battalion groups at the Ukrainian border, either to put pressure on the country or to invade it.
"20,000 Russian troops marching towards you is never a bullish sign," analysts at brokerage Capital Spreads said in a morning note. "It looks as though this dead cat bounce has reached its apex."
With the spotlight back on Ukraine once again, Europe's cyclical stocks were the worst hit in morning trade. These stocks – which are impacted by the strength of an economy - fell sharply lower with autos, the construction sector and retail leading the declines.