The Pakistan Stock Exchange's benchmark KSE-100 Index plummeted 1,328 points (3.39 per cent) amidst a global market sell-off as investors abandoned positions fearing macroeconomic headwinds and trade weaknesses.

World stock markets sank on economic worries over China and Italy and alongside the prospect of rising US interest rates, AFP quoted dealers as saying.

The National Clearing Company of Pakistan's data showed that the sell-off in Pakistan was led by foreign investors, of which individuals were net sellers of Rs675,290 worth of shares; corporates sold a net Rs918.9m; and overseas Pakistanis sold a net Rs9m.

Among local investors, the sell-off was mainly from Mutual Funds (net sellers of Rs502m worth of shares), followed by individual investors (net sellers of Rs221m worth of shares) and brokers (net Rs114m worth of shares sold).

Local Companies, Banks and Insurance Companies were in fact big buyers, snapping up Rs829m, Rs659m and Rs210m worth of shares, respectively.

The 100 Index closed at 37,898 after sliding consistently over the day. The day's high (39,297) and low (37,769) coincided respectively with the open and close of trading.

Volumes were sharply lower, with 186 million shares in all changing hands. Of the 349 scrips active, only 37 managed a positive close, while 297 closed red and 15 remained unchanged.

The Bank of Punjab (18.4m shares traded), K-Electric (12.2m), Worldcall Telecom (10.3m), TRG Pakistan (8.1m) and Lotte Chemical (6.4m) dominated volumes.

In terms of overall volume, Commercial Banks dominated trading activity, followed by Technology & Communication scrips, Chemicals, Cement and Power Generation.

Murtaza Jafar of Elixir Securities wrote: "Panic selling was witnessed in retail names on reported margin selling while index heavy MSCI scripts also came under renewed selling pressure on reported self-off from FII [Foreign Institutional Investors] and potential redemption from Mutual Funds."

"During the day, the Pakistani Rupee also weakened by another 1.5pc in the Open (Kerb) Market to Rs129.5 against the greenback [dollar]," he added.

"Conclusion of the Financial Action Task Force review meeting and clarity on funding of depleting foreign exchange reserves are likely to restore investor confidence as the Government of Pakistan has so far not announced any concrete measures or policy direction to address the balance of payment crisis," he observed.

"To note, market is down by 28pc from its peak of May ’17, where KSE‐100 index has lost $36 billion in its market capitalization, which is currently at $63bn," read a note from Topline Securities. "Today was the sixth consecutive trading session in which the mark has recorded negative returns, taking these six sessions' losses to 3,100 points (or 7.8pc)."

Global sell-off

Asia and Europe slid on the coat-tails of Wall Street, where another strong US jobs reading has further fanned expectations that the US Federal Reserve will hike rates at a quicker pace than previously thought.

Among international markets, Shanghai spearheaded the retreat, diving almost 4pc on fears as mainland investors returned from a week-long break — and despite another cut in the amount of cash the country's commercial banks must keep in reserve.

In Europe, Milan stocks tumbled 2.3pc on concerns that Italy could face a sovereign debt crisis after its populist government passed a purse-busting budget last week to the chagrin of the EU.

Elsewhere, London stocks lost 0.6pc, while both Frankfurt and Paris each lost 0.9pc in value while Tokyo was shut.

'All-round sell-off'

“It's an all-round sell-off: the prospect of high interest rates from the [US] Fed could not come at a worse time, given the slowdown in the Chinese economy and other emerging economies as well as the Italian debt and fiscal crisis,” CMC Markets analyst David Madden told AFP.

The People's Bank of China had lowered the required reserve ratio (RRR) as it looks to shore up the economy after a series of weak data, amid Bejing's trade war with Washington.

China's central bank says however that the move will pump more than $100 billion into financial markets.

“The fact the authorities are cutting the amount of capital banks need to hold in relation to their loan book suggests they are worried about the economy,” noted Madden.

“It gives off the impression the country is gearing up for a protracted trade spat.” European investors also remain preoccupied with worries that Italy could dive headlong into a full-blown debt crisis.

Rome had sparked disquiet last week by unveiling a budget that set the public deficit at around 2.4pc of gross domestic product (GDP) for the next three years, earning a rebuke from Brussels and forcing it to row back slightly.

Italy row reignites

“Matters were made worse on Monday by the reigniting of the conflict between Italy and the EU over the former's budget deficit,” said Spreadex analyst Connor Campbell.

“The European Commission had written to Italian economy minister Giovanni Tria outlining its 'serious' concerns about the budget, only for Deputy Prime Minister Luigi Di Maio to respond that the government will 'not retreat' over its spending plans.

“This resulted in another round of heavy losses in Europe.” Back in Asia, Shanghai was also hit after a week in which China was accused of using microchips in computer equipment sold in the US as part of a drive to steal technology secrets.

Wall Street's three main indices tanked despite news that unemployment had hit a 49-year low and wages saw healthy gains.

The report, which followed a slew of strong indicators on the world's top economy, saw yields on benchmark 10-year Treasuries rise for the third straight day, hitting a fresh seven-year high with the Fed expected to stick to its rate hike drive.

Analysts said the sudden surge in interest rates had deepened worries about higher inflation and an uptick in costs for loans and mortgages.

Oil prices meanwhile fell sharply after the crown prince of major producer Saudi Arabia said it could access spare capacity to fill in for any shortages from Iran when US sanctions are imposed on the country next month.