Fears that the U.S. Federal Reserve may soon begin yanking the monetary policy rug out from under markets sent global markets reeling on Thursday, with U.S. stock index futures indicating a lower open and major indexes around the world plunging.
U.S. futures had trimmed losses earlier but were back around their morning lows..
After Wednesday's delicately-balanced testimony by Fed Chairman Ben Bernanke and minutes from the Fed's last meeting, weak Chinese data converged with jitters that policymakers policymakers could begin tapering its stimulus this year.
The Standard & Poor's 500 hit its all-time high Wednesday morning as Bernanke spoke, then reversed and closed lower by 1 percent, an event that has happened only three times since 2000, according to Bespoke Investment Group.
The Japanese Nikkei closed 7 percent down, its worst tumble in several years, while Europe's stocks also fell sharply.
"Today's slump is not necessarily the end of the bull market in Japanese equities, but the next few months will be much harder going," Julian Jessop, chief global economist at Capital Economics, said in a note.
Capital had been predicting a 15 percent correction in Japanese equities, as Jessop said "the boost to the Nikkei from a weaker yen has probably runs its course."
(Read More: Nikkei Closes Down Over 7% After Volatile Session)