Shares across the world have taken a tumble after US government bond yields hit their highest level in five years yesterday, prompting fears of higher interest rates.
London's FTSE 100 index was down 30 points in early trading after New York's Dow Jones took a 130-point fall overnight.
In Japan the Nikkei fell 28 points, while Germany's Dax bourse opened with a 72-point drop.
The latest global slide came after the yield on the benchmark US treasury ten-year bond climbed to 5.27 per cent in New York.
Investors interpret rising bond yields as a signal that central banks across the world may raise interest rates, which could subsequently have an adverse impact on corporate gains.
Analysts also point out that higher interest rates are likely to discourage company takeovers by private equity groups.
"Higher bond yields continue to suggest that markets have further to fall,'' said James Crocker of Merchant Securities in London.
"We're actually surprised that European equities have managed to hold up so well over the last few sessions," he added in comments reported by Bloomberg.
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