A look at the questions surrounding the shares sell-off and what it means for investors:
- What has prompted these falls?
Fears that rising inflation could force central banks worldwide to hike interest rates has spooked investors and sent them heading for the exit.
Markets began taking a turn for the worse last week following strong US wage growth, which fuelled speculation that US interest rates might start to rise more quickly to cool inflation.
- Why now?
Global markets have enjoyed a record-breaking rally and experts have been increasingly predicting that the bubble may soon come to an end.
Many stocks have been seen as being over-valued thanks to the seemingly never-ending gains.
But the prospect of monetary tightening after a decade of ultra-low interest rates and economy-boosting stimulus in the form of quantitative easing since the financial crisis has panicked investors.
It is thought that the sharp falls are also compounded by so-called algorithmic trading, where computers make automated trades and are programmed to take certain actions in response to market data. This can exacerbate market falls.
- Is it the start of a major stock market crisis?
The falls are shocking as markets have become used to a prolonged rally and low volatility, but experts believe it is a long-overdue correction rather than a full-blown crash.
Neil Wilson, a senior market analyst at ETX Capital, said: "This looks like a technically driven sell-off - therefore one that should not herald Armageddon."
- What is a correction?
A market correction is defined as a 10 per cent drop from the most recent high, whereas a crash is usually defined as a 10 per cent plunge in just one day, which can often lead to a bear market, when a market falls 20 per cent or more.
- What does the correction mean for investors?
Investors will need to brace for more volatile stock markets over the months ahead.
Stock market falls will have an impact on the value of investments, such as pension funds and stocks, although pensions are long-term investments and therefore ride out the peaks and troughs.
