United States telecommunications company WorldCom is teetering on the edge of bankruptcy Wednesday morning, after its multi-billion dollar accounting scandal hammered global bonds and stocks overnight.
US President George W Bush has called for a full investigation into the biggest accounting debacle to rock Wall Street, saying people will be held accountable.
A spokesman for the criminal division of the US Justice Department says WorldCom is under review.
The company has been accused of fraud following its announcement it inflated cash flows by $US4 billion.
Analyst Damien Wild says the company has incorrectly accounted for $US4 billion.
"What seems to have happened is somebody within the company, presumably the CFO given now that he's been fired, authorised a transfer of $4 billion from the expense line to the capital expenditure line," Mr Wild said.
"That's a bit like buying a Rolls Royce and then claiming all the petrol you put in it is adding to your investment - you can't do it."
Stock markets from Asia to Europe and the US went on a wild ride overnight, as yet another accounting scandal buffeted an already-unsteady marketplace.
Soon after opening in New York, the Dow Jones industrial average was down 180 points and the tech-heavy NASDAQ had plunged 44 points.
But by the close, value buyers seeking out well-priced stocks had saved the market from predictions of capitulation-type selling.
The Nasdaq index finished higher, up 5.43 points or 0.38 per cent, at 1,429.42, after tumbling more than 3 per cent in early trading.
The Dow Jones closed little changed, down 6.71 points or 0.07 per cent, at 9,120.11. The broader Standard & Poor's 500 Index was down 2.60 points, or 0.27 per cent, at 973.54.
Stock markets in Europe dropped by as much as 5 per cent and the euro has risen to its highest level against the US dollar since 1999.
By early afternoon, the Footsie Index in London had dropped more than 130 points, just above the five-year lows that hit after September 11.
Germany's Dax Index and the French market lost about 4 per cent.
The market falls were widely attributed to the WorldCom revelations but are also believed to reflect debt problems among companies such as France Telecom and Atcatel.
The euro was the big winner, climbing to 99 cents against the US dollar.
In Japan, Tokyo's Nikkei stock average tumbled 4 per cent to close at a four-month low.
(Xinhua News Agency June 26, 2002)
