A flash slide in Germany's stock market dragged down indexes across the world Thursday, erasing earlier gains and shaking the confidence of investors cheering a $5 billion investment by Warren Buffet in Bank of America.
Germany's main index, the DAX, fell about 250 points in a matter of minutes to trade down more than 4 percent before recovering somewhat. By the close it was down 1.7 percent at 5,584.14.
Analysts and traders could not immediately identify a reason for the slide. Thilo Mueller of MB Fund Advisory GmbH said there was no obvious news to send the market down so suddenly and that the drop came "like lightning out of a clear sky."
"No one has been able to give a rational explanation... I think this is not the last word, I am eager to see if there is a reasonable answer why so many shares plunged at the same time," Mueller told The Associated Press.
One possibility is that the DAX may have been hurt by computer-driven trades, as happened to the Dow last year.
A May 6, 2010 "flash crash" sent the Dow industrials down 1,000 points in 30 minutes and led to 21,000 trades being canceled as erroneous. Regulators determined that it occurred when an investment and trading firm executed a computerized selling program in an already stressed market. The firm's trade, worth $4.1 billion, touched off a chain of events that ended with investors swiftly pulling their money out of the stock market.
Whether the German market was the victim of a similar trading pattern was unclear. The impact, however, was immediate on markets around the world.
Britain's FTSE 100 was pulled 1.4 percent lower to close at 5,131.10, while France's CAC-40 ended 0.7 percent lower at 3,119.00. Like all world markets, they had been trading higher before the DAX's slide.
Wall Street likewise fell, with the Dow down 1.1 percent at 11,200.57, and the S&P 500 down 1.0 percent at 1,166.18.
The euro was hurt by the German stocks' sell-off _ it slipped to $1.4380 from $1.4421 in late trading Wednesday in New York.
Until the DAX's slump, markets had been buoyed by an easing in concerns about the U.S. recovery, Buffet's decision to invest in Bank of America and upbeat earnings in Europe.
Trading was expected to remain tentative and volatile as investors wait to see if Federal Reserve Chairman Ben Bernanke will boost the U.S. economy with a new bond-buying stimulus program. The U.S. central banker is speaking Friday in Jackson Hole, Wyoming.
In the morning, commodities trader Glencore and drinks maker Diageo saw shares rise after reporting upbeat earnings. Strong results from French bank Credit Agricole had helped support financial stocks.
Corporate profits have been resilient, despite increased concerns about a global economic slowdown. Worries that the U.S. could be headed for another recession has in recent weeks caused huge volatility in equities, bonds and foreign exchange.
Meanwhile, news of Steve Jobs' departure as CEO of Apple caused a stir, as analysts sought to estimate its potential impact on the wider technology sector.
Taiwan's FoxConn Technology Co., which makes the iPhone and iPad for Apple at a massive manufacturing campus in southern China, saw big losses _ its shares plummeted 7 percent.
The resignation of Jobs, who is widely credited with turning an ailing Apple into a phenomenally successful technology company, appears to be from an unspecified medical condition that prompted him to take a leave from his post in January. He was diagnosed with pancreatic cancer in 2004 and underwent a liver transplant in 2009.
Apple's chief operating officer, Tim Cook, was quickly named CEO of the company Jobs co-founded in his garage 35 years ago.
Samsung Electronics Co. rose 2.4 percent following a court ruling in the Netherlands involving the company's global patent fight with Apple over smartphone and tablet technology and on the news of Jobs' departure.
Samsung is both a supplier of components to Apple as well as a competitor in smartphones and tablet computers.
In Asia, Japan's Nikkei 225 climbed 1.5 percent to close at 8,772.36. Hong Kong's Hang Seng was 1.4 percent higher to 19,744.50.
South Korea's Kospi rose 0.6 percent, and Australia's S&P/ASX 200 was 1.1 percent higher. Benchmarks in Singapore, Indonesia and Thailand also gained, while indexes in Taiwan, India and the Philippines dropped.
Mainland Chinese shares saw their biggest gain in 10 months with the benchmark Shanghai Composite Index adding 2.9 percent while the Shenzhen Composite Index gained 1.9 percent.
Benchmark oil for October delivery followed world stocks down and by late afternoon in Europe was down 78 cents at $84.38 in electronic trading on the New York Mercantile Exchange. Crude lost 28 cents to settle at $85.16 on Wednesday.
In currencies, the dollar was up at 77.39 yen from 77.01 yen.
David McHugh in Frankfurt, Pamela Sampson in Bangkok and Kelly Olsen in Tokyo contributed to this report.