The fall in confidence among New York dealers threatens to end the strong recovery in share prices which has occured over the past few months.

The Dow Jones Industrial Average of leading US shares fell almost 2% in early trading.

Although the index recovered towards the end of the day, it still closed down 69 at 9065.

Bad news from Boeing, the US aerospace giant, increased investors' nerves. The group has been forced to slash a total of 48,000 jobs due to Asian financial turmoil which has caused the demand for planes to crash land.

Boeing also warned that the Asian economic crisis could continue to hit its business for up to five years, causing its shares and other aerospace stocks to go into a tailspin.

Some analysts are concerned that Boeing's woes are only the tip of the iceberg and companies around the world could be badly affected by the marked slowdown in the global economy.

Investors are also rushing to take profits after the recent strong rise in stocks.

Nervous times

The fall began in New York and spread

With many financial observers pointing out that prices have risen too fast since plumetting in early Autumn, investors are becoming edgy.

London's FTSE 100 index of leading shares closed down 30 points at 5507.

The fresh slump in stock prices comes hot on the heels of sharp falls on both exchanges.

On Monday Wall Street suffered its biggest one-day fall since September. Plummeting Internet stocks sent shares spiralling down 2.32% to close at 9,116.55 - a fall of 216 points.

While a wave of selling wiped more than £36bn off the value of leading London stocks on Tuesday after the market suffered its third biggest points fall in history.

Traders worried

Worries about the state of the UK economy and a rash of redundancy announcements were seen as the main factors causing the FTSE 100 to fall 206 points, or more than 3%.

One trader said: "We've had too much, too soon, and now people are feeling less complacent concerning the economic growth outlook and how that will feed into earnings."

Fears that the world economy is still in a perilous state remain, with economic growth slowing sharply and crisis still looming in Asia, Russia and Latin America.