Major world stock markets have tumbled amid continued concern about war in Iraq and the failure of the US economy to make a sustained recovery.

Share price update - close

New York: Dow -2.4% New York: Nasdaq -0.2% Frankfurt: Dax -1.4% London: FTSE -1.8% Paris: Cac -1.8% Tokyo: Nikkei -1.7%

The leading US share index closed down 189 points at its lowest level since 1 October 1998.

And the tech-heavy Nasdaq hit a fresh six-year low.

Sentiment at opening was blighted by a poor performance by European stocks.

And decision by the US Federal Reserve to keep interest rates on hold, warning of the effect of "heightened geopolitical risk" on economic recovery, failed to inject optimism in New York.

"We are in a very strong bear market," said Rick Meckler, president of US investment firm LibertyView.

"Of course there will be a bottom, but that level may be a lot lower than we thought."

Data cheer

Data showing that US consumer confidence had proved more resilient than expected prompted a brief rally on Wall Street in morning trade.

Resilient consumer confidence has been credited for protecting the US economy from a severe downturn,

Choose your excuse for gloom

European broker

"The markets are deeply oversold and starving for good news," said Peter Cardillo, chief strategist at Global Partners Securities.

"Consumer confidence is very important. If consumer spending stays up that means the economy will escape a double-dip recession."

But while the Dow temporarily recovered to within 60 points of its start point, pessimism soon overcame investors again.

"There hasn't been a whole lot of good news," said Philip Dow, director of equity strategy at RBC Dain Rauscher.

"There is no powerful reason to be buying stuff today.

"After 2.5 years of everything you buy going down, people are having second thoughts about getting invested for the future."

Sticking points

European markets had earlier showed substantial falls as continuing concerns over war with Iraq, and disappointing corporate data, hit sentiment.

"The US market was negative [on Monday], then there is a chance of military action against Iraq and profit warnings.

"Choose your excuse for gloom," said one European broker.

The FTSE 100, which also hit a six-year low on Monday, fell a further 129 points to 3,609 in early afternoon trade.

Sentiment in Frankfurt and Paris has also been hit by the re-election of Gerhard Schroeder as German chancellor.

Mr Schroeder has been deemed unlikely to push through controversial reforms deemed by economists as necessary for revitalising the struggling German economy, Europe's largest.