World equities sank Thursday as mounting US unemployment added to worries about a slow economic recovery from coronavirus shutdowns and a second wave of the deadly disease.
Sentiment was already moribund when data was released showing new US claims for unemployment benefit slowed to 2.98 million last week.
Markets had slumped Wednesday after Federal Reserve chief Jerome Powell warned of "lasting damage" to the economy from coronavirus shutdowns.
In Asian trading Thursday, Tokyo ended down 1.7 percent, Hong Kong shed 1.5 percent and Shanghai lost 1.0 percent, as a sustained rally for global equities ran out of steam.
The negativity spilled over into Europe, where leading indices briefly slumped more than 3.0 percent before pulling back heading into the close.
"Sharp losses for US indices yesterday set the stage for Europe's weakness... as investors take heed from Powell's comments last night about the recession and its potential severity," said IG analyst Chris Beauchamp.
"If the chairman of the Federal Reserve is worried then it is time to sit up and take notice."
Powell warned of a "highly uncertain" outlook for the world's top economy, adding that lawmakers might have to provide even more stimulus to the $3 trillion already stumped up.
"The coronavirus has left a devastating human and economic toll in its wake," he said, warning that a deep, long recession "can leave behind lasting damage to the productive capacity of the economy".
Sentiment was hit also after the World Health Organization warned the virus "may never go away" and the European Union's medicines agency suggested a vaccine could be ready only in a year.
Wall Street slipped in late morning deals Thursday, with the Dow down 0.4 percent.
Briefing.com analyst Patrick J. O'Hare said the nearly three million new unemployed added to concerns about a slow recovery.
"The key takeaway from the report is that the alarmingly high level of initial and continuing claims paints a risk of a slower recovery due to weaker consumer spending activity and the rising potential that temporary job losses become permanent job losses in an elongated recovery process," he said.
Signs of an easing in the outbreak globally had led to hopes for a slow return to normality but fresh infections in South Korea, China, Germany and other countries as they eased lockdowns have thrown a spanner in the works.
They came as US President Donald Trump's top virus expert Anthony Fauci warned against re-opening too quickly, saying it could cause a second wave of infections and hurt any economic recovery.
"There is a feeling the coronavirus will be hanging over the markets for many months to come," said markets analyst David Madden at CMC Markets UK.
Meanwhile, oil prices surged as the International Energy Agency said the easing of lockdowns and output cuts had helped the oil market after "Black April", when US prices collapsed into negative territory on evaporating demand and a vast supply glut.
- Key figures around 1530 GMT -
London - FTSE 100: DOWN 2.8 percent at 5,741.54 points (close)
Frankfurt - DAX 30: DOWN 2.0 percent at 10,337.54 (close)
Paris - CAC 40: DOWN 1.9 percent at 4,273.13 (close)
Milan - FTSE MIB: DOWN 1.8 percent at 16,867.76 (close)
Madrid - IBEX 35: DOWN 1.3 percent at 6,545.60 (close)
EURO STOXX 50: DOWN 2.0 percent at 2,754.39
New York - Dow: DOWN 0.4 percent at 23,163.86
Tokyo - Nikkei 225: DOWN 1.7 percent at 19,914.78 (close)
Hong Kong - Hang Seng: DOWN 1.5 percent at 23,829.74 (close)
Shanghai - Composite: DOWN 1.0 percent at 2,870.34 (close)
Brent North Sea crude: UP 3.4 percent at $30.18 per barrel
West Texas Intermediate: UP 3.5 percent at $26.17
Euro/dollar: DOWN at $1.0802 from $1.0818 at 2100 GMT
Dollar/yen: UP at 107.12 from 107.03 yen
Pound/dollar: DOWN at $1.2196 from $1.2232
Euro/pound: UP at 88.56 pence from 88.44 pence