Tens of billions of pounds were wiped off the value of shares on both sides of the Atlantic amid renewed fears about the world economy and the solvency of big European banks...
Panic selling of shares in Italy's largest bank, Unicredit, even had to be suspended because of the scale of the sell-off. When dealing resumed the shares were 10 per cent lower than their opening price.
And in France mistaken rumours that Société Générale, the country's second-biggest bank, was a distressed seller of gold caused it to lose 20 per cent of its value. The fall was stemmed only when the bank put out an official denial: "SocGen categorically denies all the market rumours." It ended up 14 per cent down on the start of the day.
All the French banks have suffered in recent weeks because they have lent large sums to the Greek government and businesses – SocGen and Crédit Agricole own Greek subsidiaries. They are also exposed to Portugal, Spain and Ireland, all rated poor risks.
Worse still for the French groups is the persistent speculation about a re-assessment of French Treasury bonds by the credit-rating agencies.
France is widely regarded as the next nation likely to lose its AAA status, after America's downgrade. As the core "safe" holding for all French financial institutions, any devaluation of government bonds would have serious implications.
At best it would mean cash loans from the European Central Bank, or a an injection of new capital from the French government, which would have to be borrowed from the markets. That would put France's creditworthiness under yet more pressure.
A similar process could overwhelm Unicredit and the Italian government, already relying on the ECB to help to fund its public borrowings.
The threat of this vicious cycle is a nightmare for policymakers. Highlighting the interdependency of the big banks, Royal Bank of Scotland, Barclays and HSBC shares extended losses.
At worst, this process could trigger another sovereign-debt crisis or a Europe-wide credit crunch, and freeze money markets again, as happened in 2007, when banks refused to lend to each other at virtually any interest rate. That choked off the supply of credit to the wider economy and helped to trigger the great recession.