Stock markets are taking a pounding due to fears over the global economic recovery and a crisis of confidence at the largest bank in Portugal.

Weak economic data from Italy and mounting concern about the future of Banco Espirito Santo drove the sell-off, spreading from southern euro nations across Europe.

Portugal's PSI was almost 4.5% down - with banking stocks worst affected as allegations surfaced that the bank's parent firm covered up a €1.3 billion hole in its accounts.

The Italian MIB and IBEX in Spain had both lost more than 2% - with the DAX in Germany and French CAC shedding 1.5%.

Dublin's ISEQ has fallen around 43 points this afternoon.

The rush for safe havens, and gold in particular, was also seen in London - the FTSE 100 losing just shy of 1% after bleeding value each day over the course of the week amid fears of a looming correction.

The problems in Portugal were blamed on shares and bonds of Espirito Santo Financial Group, the chief shareholder in Banco Espirito Santo, being suspended over "material difficulties" at the parent firm.

It was reported earlier by the Portuguese newspaper Diaro Economico that Espirito Santo FG was considering filing for controlled insolvency if debt re-negotiations with clients failed.

Banco Espirito Santo shares dived more than 17% at one stage despite government assurances the bank was solid.

Trading in the bank's shares were also later suspended - pending an announcement.

Italy's contribution to the sell-off was economic data which showed Italian industrial output posting its steepest monthly fall since November 2012 in May, casting doubts over the country's economic recovery.

Nerves were already frayed across world stock markets after confirmation the previous evening that the US Federal Reserve would end its quantitative easing programme in October if the US recovery continued on its current course.

The move would effectively cut off the supply of cheap credit the financial markets had grown used to since after the financial crisis - the stimulus being cited as artificially lifting world stock market values - some to record highs in recent months.

Dow Jones futures showed a 1% tumble was expected, 90 minutes ahead of opening on Wall Street.