Global markets nosedived overnight following the Fed's announcement that it is considering reducing its stimulus in addition to signs of a slowing Chinese economy.

European stocks sank the most in more than 18 months after Federal Reserve Chairman Ben S. Bernanke said the central bank may end bond purchases next year if the economy strengthens in line with forecasts.

The Stoxx 600 plunged 3% to 284 at the close of trading, the biggest retreat since Nov. 21, 2011. In London, the FTSE 100 tumbled by 189 points (-3%) to settle at 6160 while the German DAX sank by 269 (-3.3%) points to close trading at 7928.

U.S. stocks fell, sending the S&P 500 to its biggest loss since November 2011, as global equities tumbled after the Federal Reserve said it may phase out stimulus and China's cash crunch worsened.

The S&P 500 sank by 41 points (-2.5%) to 1588 and has now slumped 3.9% over two days. The Dow Jones erased 354 points (-2.3%) to settle at 14758.

Gold futures fell to the lowest since September 2010 after the Federal Reserve said stimulus may be reduced later this year as the economy recovers. Gold futures for August delivery tumbled 6.4% to $1286.20 on the Comex in New York.

Crude oil fell the most in seven months on signs China's economy is slowing and after Federal Reserve Chairman Ben S. Bernanke said the central bank may start curbing bond purchases later this year.

Crude oil for July delivery declined 2.9% to $95.40 a barrel on the New York Mercantile Exchange. There is no major local economic data due out during today's session.

Morning Market Update: Tough Day Ahead is a post from: Australian Stock Report Market Pulse Blog