World stock markets slumped Thursday on Federal Reserve warnings of serious downside risks to the world's biggest economy, with investors fleeing to safe-haven currencies and assets. Dealers' screens were awash with red as the Fed's latest multi-billion-dollar move to shore up the American economy fell flat just as economic leaders descended on Washington for IMF and World Bank annual meetings. "It's the ever increasing threat of another recession that is really spooking investors," said analyst Simon Denham at Capital Spreads. The Greek and eurozone debt crises remain negative factors for sentiment. Europe's major stocks markets tumbled, with London, Paris, Frankfurt and Madrid dropping below more than five percent at points during the trading session. In late afternoon deals, London's FTSE 100 index of leading shares was down 4.62 percent to 5,044.62 points, Frankfurt's DAX 30 fell 5.09 percent to 5,157.42 points and in Paris the CAC 40 shed 4.75 percent to 2,796.36. Milan slid 3.69 percent and Madrid tumbled 4.35 percent on fears that Italy and Spain could fall victim to the fast-moving eurozone crisis. In Asia, Hong Kong nosedived 4.85 percent to its lowest finish since July 2009 and Sydney plunged 2.63 percent to its worst close in more than two years. Tokyo shed 2.07 percent and Shanghai lost 2.78 percent. Investors piled into safe-haven assets, with the dollar and yen rising against the euro. In London afternoon deals, the euro plunged to a 10-year low point against the Japanese currency at 102.23 yen and to an eight-month dollar low of $1.3395. The yield on German government bonds, another safe-haven asset, fell to a record low of 1.665 percent. The Fed announced overnight that it would shift $400 billion in its shorter-term debt portfolio holdings to longer-term bonds, a move it said would lower rates for mortgage holders and businesses. But the widely-expected plan -- nicknamed 'Operation Twist' -- was overshadowed after the Fed warned of "significant downside risks to the economic outlook" amid high unemployment, slow growth and a depressed housing market. Wall Street opened sharply down after falling steeply Wednesday, with the Dow Jones Industrial Average down 2.6 percent in the first 10 minutes of trade, the broader S&P 500 dropping 2.4 percent and the tech-heavy Nasdaq Composite slumping 2.3 percent. Mexico's stock exchange opened down 3.27 percent and in Brazil, the Sao Paulo stock market plunged 3.49 percent. Brazil's currency, the real, also fell in value against the dollar to its lowest level in two years at 1.92 reals to the dollar. The leaders of six Group of 20 industrialised and developing nations called Thursday on eurozone governments to urgently tackle their debt crisis, warning of contagion risks to the world economy. At a press conference in Washington Christine Lagarde said the global outlook had weakened and risks have increased, "but there is a way forward, if countries act now, act boldly, and act together." World Bank president Robert Zoellick also called for action, warning: "The world is in a danger zone." But on the markets, with no concerted signs coming from politicians, bleak signals from the Fed carried the day. "While Operation Twist was well anticipated perhaps the severe warning from the Fed that 'there are significant downside risks to the economic outlook' was not," noted Rabobank analyst Jane Foley. Markets were also rocked by news that Chinese manufacturing had contracted for the third straight month in September, while eurozone economic private sector-activity shrank for the first time in more than two years. Sentiment was further damaged by escalating concern over the banking sector in Europe, linked to contagion from the eurozone debt crisis, and in the United States, and the re-emergence of a bitter political row to raise Washington's debt ceiling. "Equity markets have been bombarded by bad news after bad and this week looks to have been as bad as any so far," added analyst Denham. "Major banks across America and Europe have been downgraded on top of Italy's downgrade a few days ago. The focus has fully shifted back onto the banks again as concern augments about their exposure to sovereign debt." The Fed announcement piled further misery on markets already reeling due to the ongoing Greek debt crisis, which analysts fear could end with Athens defaulting and another global financial crisis. "The negative mood has returned as doubts emerge regarding the effects of Operation Twist," said Spreadex trader Jordan Lambert. "Investors are sceptical that forcing down long-term rates will spur activity in the stagnant housing sector as the problem seems to lie in prospective home buyers not being able to obtain the necessary borrowing. "This is exacerbated by the banks' cautiousness to lend due to the dire unemployment situation." Investors also digested downgrades by Moody's on three top US banks -- Bank of America, Wells Fargo and Citigroup -- saying it saw the US government less willing than before to rescue them if they become unstable.