Difficult conditions prevail on Wall Street
But at the close dealers staged a rally, and the Dow Jones industrial average closed down just 141 points or 1.5% at 8,762.
By mid-afternoon the Dow Jones industrial average in New York was over 400 points down, on the second day of trading since the index recorded its biggest ever points decline.
London, FTSE 100
down 127 points to 4,722
Paris, CAC-40
down 81 points to 3,890
Frankfurt, Dax
down 154 points to 4,042
Hong Kong Hang Seng
up 2.7%
Tokyo Nikkei
up 2.7%
And worst of all, the broader S&P 500 index had dropped 38 points to 994, slumping below the psychologically important 1,000 level for the first time since October 1998.
Traders had been hoping that US stock markets would not repeat the dramatic falls of Monday, when trading restarted for the first time since the attacks.
But instead a wave of profitability fears meant sentiment sank.
And the publication of the Federal Reserve's periodical Beige Book survey - which said the economy in the six weeks or so right up until the day before New York and Washington DC were attacked was deteriorating - added to the gloom.
Europe follows US lead
European stocks also lurched deep into negative territory, with the FTSE 100 index closing 127 points lower at 4,722.
And both leading blue-chip indexes in France and Germany lost more than 2% of their value.
Earlier, Tokyo's Nikkei 225 share index had closed up 2.7% - slightly off its highs for the day - one day after the Bank of Japan joined the round of rate cuts implemented by central banks worldwide.
Uncertain future
The aviation industry is still topping the list of the many industries facing great uncertainty in the aftermath of the terrorist attacks.
Shares in the world's leading aerospace company Boeing - which has announced that it would slash up to 30,000 jobs - fell as much as 3% in opening trade on Wednesday before rebounding to its opening price.
Shares in many of the world's airlines remained deeply depressed, although fresh falls on Wednesday were modest in most cases.
Shares in UK aero-engine maker Rolls-Royce bounced after a statement revealed the firm was at least not troubled enough to join in the round of job cuts announced by Boeing and some airlines.
Ryanair and EasyJet stock also gained, as hopes rose that carriers not dependent on the transatlantic market would be least affected by the fall in passenger numbers.
Amongst other firms suffering in the aftermath of the attack, Kodak slid 11% after it warned its profits would be hit by the disaster.
A whole host of companies as diverse as clothing, banking, media and hotels have all warned that business will be hurt by the attacks.
Dollar surge
In Tokyo, the benchmark Nikkei 225 index briefly surged above the key level of 10,000, before closing slightly below, at 9,939.
The brighter mood followed a surge in the value of the dollar on Asian markets, after Japanese monetary authorities intervened for the second time this week to stop the battered US currency from falling below 117 yen.
Finance minister Masajuro Shiokawa said that pushing down the value of the yen was the most effective way to offset deflationary pressure hanging over the Japanese economy.
Investors will continue to monitor the movement of the yen following its renewed rise against the dollar, dealers said.
The markets are also expected to pay close attention to political developments between the US and Afghanistan, amid growing concerns over a US retaliation following the terror attacks on New York and Washington.