EDS gave up more than 40 per cent from its previous close as US markets opened after it announced that existing customers had stopped spending and new contracts were proving hard to find.

Markets slumped yesterday as another batch of profit warnings and poor economic data in the United States knocked sentiment. Jitters about the cost of a possible attack on Iraq also weighed on US markets after an Iraqi official at the United Nations accused the United States of lying to justify an attack on the country.

The Dow Jones fell through the 8,000 level while the Nasdaq came close to five-year lows. European bourses did worse, many dropping through five-year floors. In Dublin, stocks gave up 1.3 per cent with the banks badly hit.

Markets were hit early by overnight profit warnings from Electronic Data Systems (EDS), the second-largest global computer services provider after IBM, and French catering giant Sodexho.

By the close, EDS, which employs 400 people in Dublin, had halved in value to $17.20 (€17.48).

The news weighed on rival IBM, which lost almost 7 per cent on the day.

"Everyone had anticipated they \ were going to see a turnaround and see more capital spending and that hasn't been the case," said Mr Dan McMahon, head of block trading for CIBC World Markets.

"The Iraq speech snuffed out the possibility of bargain hunting. Now the sabres are rattling from the other side."

A double dose of soft US economic data on unemployment and from the housing sector also soured sentiment. The Nasdaq Composite Index lost 35.69 points, or 2.85 per cent, at 1,216.44. The Dow Jones Industrial Average lost 230.06 points, or 2.82 per cent, at 7,942.39. The broader Standard & Poor's 500 Index lost 26.14 points, or 3.01 per cent, at 843.32.

In France, catering company Sodexho Alliance said management and accounting problems at its British unit - which employs 1,200 people in Ireland - meant it would undershoot its year profit forecast by as much as 14 per cent.

Its shares fell 30 per cent as investors shied away from European markets. "The realisation has finally dawned that this is not a particularly strong upturn," said Mr David Thwaites, European equities strategist at BNP Paribas, as investors bailed out of economically sensitive industrials.

"That doesn't mean it's a double-dip recession, but it is fully consistent with a protracted weak upswing and is damaging earnings expectations."

His view was echoed by Mr Robbie Kelleher, chief economist at Davy Stockbrokers, who said worries about the health of the global economy were very much to the fore of investors' minds, with concerns particularly focused on mainland Europe.

"For the last several months, the data emerging from the German economy has been very soft, but Wednesday's industrial production numbers from France for July suggested the steam had run out of the one large economy [in Europe] that still seemed to have some momentum left," he said. "Toss in a continuing stream of profit warnings and it makes any recovery in equity markets look very difficult indeed."

The German DAX 30 index plumbed a new five-and-a-half-year low, while the Paris CAC 40 index slumped to its lowest closing level since January, 1998.

Across the 12-nation euro zone, the Euro Stoxx 50 index fell 2.1 per cent to 2,333.4 points in late trade, leaving it just 40 points, or 1.7 per cent, above July's five-year nadir.

In the US, the latest US jobless claims figures, which were a slightly higher-than-expected 424,000, added to the market's woes sparking concerns that higher unemployment could douse US consumers' purchasing power.

"The data is a bit on the gloomy side. The jobless claims number shows that the employment market is getting a little bit worse," said Mr Matthew Wickens, a global economist at ABN Amro.

"The economy is not really recovering, despite low interest rates," said Mr David Briggs, head of equity trading for Federated Investors.

"We're not creating jobs and companies are not able to generate a lot of earnings."

In addition, he said, "Iraq is on everyone's mind." Another report of falling profits out of the financial sector, from investment bank Morgan Stanley, also soured investor sentiment.

Asian markets were also on the back foot, with Hong Kong stocks falling 0.5 per cent. - (Additional reporting Reuters and Financial Times Service)