The uncertain worldwide growth outlook flushed investors out of riskier assets on Monday, sending shares and commodities lower, despite signs that a drive by Europe's leaders to tackle the region's debt crisis was gathering momentum.
The euro slid 0.1 percent to $1.2420, but was above the $1.2288 it hit on Friday, its lowest level since July 2010, while Brent crude oil fell below $97 a barrel to a 16-month low.
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But safe haven German government bond yields also retreated from last week's record lows as some investors looked to take profits on sharp moves in the past week, with low liquidity due to a UK market holiday exacerbating price swings.
"Investors are just fleeing risk assets," said ATI Asset Management chief investment officer Simon Burge.
The latest sell-off followed disappointing U.S jobs growth figures on Friday and weak Chinese manufacturing data, which stoked fears that the problems in the euro zone are causing a worldwide slowdown in business activity.
Those fears caused sharp falls across Asian markets on Monday, dragging Tokyo's Topix index to a 28-year low, and followed a fall of more than 2 percent in U.S. stocks on Friday.
The MSCI world equity index was down 0.5 percent at 290.58 points, back at levels last seen in December before a massive wave of coordinated central bank intervention sparked a recovery.
In thin European markets, the FTSE Eurofirst 300 index of top shares was down 0.5 percent at 949.31 points after hitting a six-month low on Friday, while the blue chip EuroSTOXX 50 was down 0.1 percent at 2,066 points.
A heavy calendar of political events later this month, which could help determine how the euro zone crisis unfolds, and policy meetings by the European Central Bank and the Bank of England this week, followed by the U.S. Federal Reserve in mid-June, were likely to keep markets on edge.
"Without any political or monetary intervention, markets are left in a vacuum," said Stewart Richardson, chief investment officer at RMG Wealth Management.
"The potential for a market capitulation in this period is high, and if we are correct in this view, we fully expect co-ordinated money printing from the major central banks towards the end of June," he said.
Europe's leaders are trying to ease market concerns by speaking out about moves to greater fiscal integration ahead of their summit at the end of the month and before a G20 group of nations gathering on June 18 and 19.
German Chancellor Angela Merkel has been pressing for a central authority to manage euro area finances, and also wants a coordinated approach to reforming labour markets, social security systems and tax policies.
Spain, which is struggling to shore up its banking system, signalled over the weekend that it was on board with a key element of the plan.
Spain's Prime Minister Mariano Rajoy called for the establishment of a central authority that would oversee and coordinate national budgets in the euro zone.
Spain will provide a big test of investor sentiment this week when it auctions more government debt on Thursday. Its 10-year bond yields are hovering around 6.5 percent, close to the 7 percent level at which other indebted countries have been forced to seek an international bailout.
Spain's 10-year government bonds eased three basis points on Monday to 6.5 percent.
In commodity markets, signs that the U.S. economic recovery is faltering as China's growth slows sent oil and copper to multi-month lows on Monday, while rubber sank more than 5 percent.
Brent crude lost nearly 2 percent to hit a session low of $96.61 a barrel, its lowest since late January 2011.
Gold mostly held its ground around $1,615 an ounce after its biggest rally in more than three years on Friday suggested bullion is regaining its safe-haven draw.