Rattled by growing concerns about the health of the global economy and debt contagion,

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European shares sank in early trade today, with benchmark indices slumping by as much as 5 per cent.

Taking cues from the sell-off seen in Asian markets earlier in the day, German shares bore the brunt of the negative sentiment in morning trade as the key Dax index plummeted by over 5 per cent to 5,622.08 points.

Shrugging off the initial optimism, European bourses continued to fall amid increasing concerns about the European debt turmoil, which could spread to rich economies such as Italy and Spain.

The London Stock Exchange's benchmark FTSE 100 tumbled by 4.20 per cent to 4,856.23 points, while its counterpart in France -- the Cac 40 index -- shed nearly 3 per cent to 3,034.13 points.

Global stock markets have been in a tailspin in the last few days, with the investor sentiment ravaged by S&P's downgrade of US creditworthiness. Going by estimates, worldwide investor wealth has eroded by over USD 7 trillion in the past two weeks.

Among the Asian markets, Hong Kong's key Hang Seng index went into a tailspin, shedding 5.66 per cent to end the day at 19,330.70 points.

The Japanese benchmark Nikkei 225, too, closed in negative terrain, losing 1.68 per cent to end at 8,944.48 points.

In one of the worst trading sessions since the 2008 financial meltdown, Wall Street crashed on Monday, with the Dow Jones Industrial Average plunging over 634 points. The two other key indices -- the S&P 500 and Nasdaq Composite -- also closed deep in the red.