Fears that the U.S. economy may be heading back into recession and that Italy and Spain won't be able to deal with their debts battered stocks, the euro and oil prices Thursday.
The selling pressure in stock markets accentuated through the day as investors fretted over the U.S. economic recovery, a day before crucial non-farm payrolls for July, which often set the tone in markets for a week or two after their release.
Investors, already fidgety after the protracted U.S. debt deliberations, and worries that Italy and Spain are getting deeply embroiled in Europe's debt crisis, searched for assets considered safer, such as gold.
"$2.3 trillion of value wiped off equities worldwide over a handful of days and the cost is still rising," said Howard Wheeldon, senior strategist at BGC Partners.
In Europe, most markets shed more than 3 percent of their value. Of the major markets, France's CAC-40 tumbled 3.9 percent to 3,320.35 while Germany's DAX tumbled 3.4 percent to 6,414.76. Britain's FTSE 100 index of leading British shares ended 3.4 percent lower at 5,393.14.
On Wall Street, the Dow Jones industrial average was 3 percent lower at 11,545 while the broader Standard & Poor's 500 index fell 3.3 percent to 1,219.
Among major stock markets, only Tokyo's Nikkei 225 index actually traded up 0.2 percent to 9,659.18 after the Bank of Japan intervened to sell the yen and buy the dollar. That drove the dollar above 80 yen Thursday for a brief while from 76.99 late Wednesday. By late afternoon London, the dollar was 2.4 percent firmer at 78.97 yen.
Japanese Finance Minister Yoshihiko Noda said financial authorities decided to intervene in the currency markets because the strong yen could hurt the country's export-dependent economy and slow its efforts to recover from the March 11 earthquake and tsunami.
The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.
A strong yen is painful for Japan because it reduces the value of foreign earnings for companies like Toyota Motor Corp. and Nintendo Co. and makes Japanese goods more expensive in overseas markets.
The intervention was coupled with monetary policy easing by the central bank's board. The bank expanded an asset purchase program to 50 trillion yen ($638.3 billion) from 40 trillion yen. It also kept its key interest rate in a range of zero to 0.1 percent.
Japan's moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.
Investors have been looking for safe havens to park their cash after figures earlier this week pointed to a dangerous slowdown in the U.S. economy at a time when Europe's debt problems appear to be engulfing big economies like Italy and Spain.
Yields on Spanish and Italian bonds stabilized Thursday, still much higher than just a month ago but further away from the 7-percent level generally seen as a nation's breaking point. The yield, or interest rate, of Italian 10-year bonds was 6.19 percent, while its Spanish equivalents were at 6.21 percent.
The rise in the yields of both Italian and Spanish bonds came despite indications that the European Central Bank intervened in the markets to prop up their bonds.
Questions about the bond-buying program, left unused for four months, dominated Trichet's news conference following Thursday's widely anticipated decision to leave the ECB's main interest rate unchanged at 1.5 percent.
Trichet left open the possibility of reopening the bond-purchase program but appeared determined to keep market traders off-balance about the bank's actual intentions.
"I never said it was dormant," he said, adding that the bank would reveal any purchases at the regular Monday disclosure.
"You will see what we do," he said. "If we intervene, we intervene, and we will publish the amount of what we have done."
Elsewhere in Asia, Hong Kong's Hang Seng shed 0.5 percent to 21,884.74 while China's Shanghai Composite Index advanced 0.2 percent to 2,684.04.
South Korea's benchmark Kospi dropped 2.3 percent to 2,018.47.
Worries over the global recovery hit oil prices hard too. Benchmark oil for September delivery was down $3.37 at $88.56 a barrel in electronic trading on the New York Mercantile Exchange.
Alex Kennedy in Singapore contributed to this story.