London's FTSE 100 had opened higher on Tuesday, but the rally quickly ran out of steam and the index was down by about 1% during morning trade.

Other major European markets were showing similar falls.

Chancellor Rishi Sunak is expected to announce more financial help later for UK firms affected by the outbreak.

Chris Beauchamp, chief market analyst at IG, said: "The government response from around the globe appears to be ramping up once again, as the chancellor prepares to unveil more measures to help support businesses.

"Whatever is announced, the measures will be expensive, but if they can form a credible package, and one co-ordinated with other governments, then markets may try to find a positive, although it may take time."

On Monday, French President Emmanuel Macron said his government would guarantee €300bn of loans, and pledged that no French company would be allowed to collapse.

Asian shares continued to see volatile trading on Tuesday with markets in Tokyo, Hong Kong and Shanghai swinging between losses and gains.

US stock markets had slumped on Monday, with the Dow Jones losing close to 13% and the S&P 500 falling almost 12%, marking the biggest one-day falls for both indexes since "Black Monday" in 1987.

That followed the US Federal Reserve making another emergency rate cut on Sunday, prompting central banks around the world to ease policy in the biggest co-ordinated response since the global financial crisis more than a decade ago.

Investors are now concerned that the world's central banks may have used most of their ammunition to fight the economic impact of the coronavirus outbreak.

Monday's stock market falls follow US indexes on Friday seeing their biggest daily gains since October 2008. That came just a day after the Dow suffered what was then its biggest one-day plunge since the crash in October 1987.

In the last month, the Dow Jones Industrial Average has racked up the five biggest one-day points falls in its 135-year history. In March alone the index has also seen its four biggest one-day points gains on record.

Wall Street's so-called "Fear Gauge" has just topped the levels seen during the financial crisis more than a decade ago. The Chicago Board Options Exchange's VIX, a measure of stock market volatility, surged by almost 43%, surpassing the level seen in 2008.