Wall Street slumps again as investors shun risk

US stocks tumbled more than 4 percent, almost wiping out gains from a relief rally the previous day, as rumours about the health of French banks sparked concern that the euro zone's debt crisis could claim new victims.

The rumours tapped into investors' worst fears of contagion. French bank stocks tumbled and led European markets lower. Safe-haven gold hit another record and investors pushed into US Treasuries, while oil prices also rose.

The Dow Jones industrial average ended down 519.83 points, or 4.62 percent, at 10,719.94. The Standard & Poor's 500 Index lost 51.77 points, or 4.42 percent, at 1,120.76. The Nasdaq Composite Index fell 101.47 points, or 4.09 percent, at 2,381.05.

European shares ended sharply down, led by financials, with Société Générale down more than 22 percent at one point on rumours about the French bank's financial solidity, all of which it denied.

The equity market also came under intense pressure earlier in the session on persistent rumours about a downgrade of France's sovereign AAA rating, though the three major ratings agencies had all confirmed their French sovereign rating.

French banks' credit default swaps were sharply wider, while the country's benchmark share index fell 5.5 percent. The FTSEurofirst 300 index of top European shares ended 4 percent lower at 910.39 points, the 11th fall in 13 sessions.

Japan's Nikkei share average snapped a three-day losing streak after Wall Street surged on the Federal Reserve's pledge to keep rates near zero for another two years, though blue-chip exporters fell as the yen regained steam. The benchmark Nikkei average closed up 1.1 percent at 9,038.74, while the broader Topix gained 0.8 percent to 776.73.