The US stock market has suffered a massive fall as panic over the financial situation in Russia and the Far East led to a dramatic late sell-off by investors. The Dow Jones index fell more than 6 per cent, by far more the most significant fall during the recent market upheavals.

The major fall is certain to mean serious losses on European markets when they open this morning, as all European markets were closed yesterday by the time that the US market suffered most of its falls. As the billions of dollars were wiped off share prices, money poured into the US long bond and its price surged to an all-time high. This brought US long-term interest rates to a new low of 5.3 per cent, pointing to expected cuts in short-term interest rates.

The latest share collapse - if it continues today - will lead to increasing pressure on international central banks to reduce short-term interest rates. Pressure will be heaviest on the Federal Reserve Bank, where investors and analysts have already been looking for a rate cut. The losses, some of the heaviest since Black Monday 1987, followed falls on the ISEQ and other European stockmarkets. The NASDAQ index, which is made up mainly of high technology companies, suffered its heaviest points loss ever, falling 124 to close at 1515, with billions wiped off the value of main high tech firms. In percentage terms, the NASDAQ fell by over 8.5 per cent.

The falls on Wall Street are second only in recent years to the losses suffered last October, when the Dow Jones fell by 554 points or 7.18 per cent.

Analysts said the selling snowballed yesterday after the Dow fell below 8,000 points, which had been considered a key psychological floor for the market.

Wall Street was dogged by concerns about Russian instability, the economic ills in Asia and the spill-over effects on Latin America and the risk of global recession.

"I think this is a carryover of the Russian situation," said Mr Sam Stovall, chief investment strategist for Standard & Poor's Industry Reports.

"It's an Asian situation rolled into a Russian situation and worry about Latin America. It's getting closer and closer to our shores," Mr Stovall added.

Earlier in the day, other world bourses also took fright as investors expected further Russian shocks and feared a global recession was looming.

The Russian lower house of parliament's rejection of Mr Viktor Chernomyrdin as prime minister sparked further market uncertainty. More talk of political unrest now looks a probability and the rouble fall of 20 per cent means hyperinflation and further economic instability is now threatened.

Even before Europe opened yesterday, the extent of instability dogging international markets was demonstrated as Hong Kong stocks plunged by 7.1 per cent, as the government applied brakes to a two-week buying spree and indicated a more flexible approach in its battle against speculators. The key Hang Seng Index fell 554.7 points to close at 7,275.04. Brokers said stocks were falling to more realistic levels after the government's intervention, which had pushed the index up by more than 17 per cent in two weeks.

Later European stock markets were pushed into negative ground in late trade after the Dow Jones began to slide and nervous investors knocked it under the 8,000 points level to its lowest in seven months.

Latin America suffered in New York's wake as Russian woes spread. Brazilian stocks fell more than 2 per cent and Mexican shares were down more than 1 per cent in early trade.

Most European equity markets made brief, brave rises in early trade but were later upset when a senior Kremlin aide warned of political revolution and said Mr Chernomyrdin would likely be rejected as the next Russian prime minister.

Mr Chernomyrdin earlier said that Russia was "on the verge of economic and political breakdown" and the rouble devaluation and debt moratorium two weeks ago had been a mistake.

"Everyone is scared. Russia is still a big problem and nobody knows what's going to happen. There is no good news anywhere," said one trader at a French bank in Frankfurt.

Political and economic uncertainty virtually shut down Russia's share market with a mere $1.5 million worth of stocks changing hands in the country's largest market. Russia's main interbank foreign exchange market remains suspended.

Germany, Russia's biggest creditor, saw its bourse-traded DAX battered to close more than 3 per cent weaker at 4,833.89 points. France's CAC 40 was 1.37 per cent lower at 3,658.11 points and Italy's MIB 30 was down 1.99 per cent at 31,443 points.

London markets were closed yesterday for a public holiday, removing liquidity from European trade, but will be a major factor today.