Sharemarkets in the United States and United Kingdom hit year lows during trading yesterday, but it appears the release of masses of US economic data later this week will test the limits of investor confidence.
The latest falls came amid escalating doubts about the stability of European banks, Europe's debt crisis and doubts over China's economic growth.
In the US the Standard and Poor's top 500 index tumbled 2.68% to an eight-month low, with 499 stocks falling and one rising.
The Dow Jones Industrial Average fell 2.65%, skidding below the psychological resistance level of 10,000 points to 9870.
Across the Atlantic the UK's FTSE 100 index closed down 3.1%, its lowest close since September last year.
On the Dow Jones, for every stock that rose, 11 fell.
The tech-heavy Nasdaq shed 3.85%, while on the FTSE there was not a single stock rise.
Similarly, Asian stocks fell during trading yesterday, with Japan's Nikkei reversing earlier gains and closing down 1.3%.
In Australia, the ASX 200 shed 0.9%.
Craigs Investment Partners broker Peter McIntyre said this week's US data would become a "real test of investor confidence".
Forsyth Barr broker Suzanne Kinnaird said overnight tumbles were because of Chinese growth indicators and weak US consumer confidence, and also warned about the forthcoming US data.
"There's a lot of uncertainty out there and investors in New Zealand are continuing the trend of recent weeks of sitting on the sidelines, typified by a weak market and low volume," she said.
Mr McIntyre said the Chicago VIX volatility index spiked 20%, reflecting "a gauge of the fear in the market".
On Friday, US home sales data would be released, with a decline expected.
Construction spending was expected to show only a small increase.
A major manufacturing index statement was also expected to reveal a decline.
On Saturday, US factory orders data would be released, with expectations of a 1.2% increase.
But with US unemployment at 9%, one of the "key" data releases to be scrutinised would be a report on "non-farm payroll data".
This was expected to show a huge reversal in job numbers.
In April, the non-farm payroll data showed an increase of 290,000 US jobs and in May a gain of 431,000 jobs.
Saturday's data was expected to show a loss of 115,000 jobs for June.
However, Mr McIntyre said Craigs' forecast was for a loss of 150,000 US jobs in June.
Ms Kinnaird said there were fears about what the US employment data would reveal, plus the markets were nearing the end of the first quarter.
"Some investors are probably looking at locking in capital losses and starting the new quarter afresh," she said.
Mr McIntyre said rather than US businesses employing more people, they were expected to report longer hours were being worked by existing staff.
The markets could be rocked by the US data, he said.
"It is a matter of investor confidence and their inability to get out of first gear," Mr McIntyre said, referring to the market jitters.
Gold, as the safe-haven investment, gained slightly to trade about $US1241 ($NZ1772) on the spot-gold market, having hit a record last week of $US1265.
