Downbeat US jobs data as well as worries over the Greek and Spanish economies have combined to make investors doubt the strength of the fledgling recovery raising fears of a double dip recession.

US shares lost 1.4% of their value, in Paris the CAC Index closed down 3.5%, London and German markets lost more than 1.5% and Japan's Nikkei index fell nearly 3%

News that Portugal's opposition parties had defeated a government austerity plan today exacerbated the concerns about Greece, Portugal and Spain also grappling with massive budget shortfalls. The cost of insuring $1m of Spain's sovereign debt rose to $162,000, twice as much as the UK and four times as much as Germany forcing Spain to pay more to finance its debt. Meanwhile Portugal only managed to raise €300m of the €500m it was expecting in its most recent bond sale.

Nicholas Colas, chief market strategist at ConvergEx said: “There was a sense that the European Central Bank did not have the situation under control. It's that void that concerns people. Investors worry that if regulators can't help stem problems now, they could end up snowballing and becoming an every bigger spread elsewhere."

As the UK government announced today that it was suspending quantitative easing (QE), the fear now is that investors believe the fragile recovery is the direct result of governments pumping billions into their economies to stimulate demand rather than underlying strength. The fear is that the economies will begin to shrink again.