Oil prices plumbed fresh five-year lows on Tuesday, prompting investors worried about the global economy and renewed political uncertainty in Greece to dump shares.
The Greek government brought forward a presidential vote to next week in a gamble that could trigger parliamentary polls if Prime Minister Antonis Samaras fails to have his candidate elected. Greek government bond yields
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Chinese shares notched up their biggest daily percentage loss in more than five years and the yuan currency took its biggest hit against the dollar since 2008.
But the main action was in oil. Brent crude
Brent, which has fallen some 43 percent in the last six months on concern over a swelling supply glut, was last trading at $66.77 per barrel.
European shares fell, following losses in Asia. Wall Street also looked set to open some 0.3 percent lower, according to stock index futures
The pan-European Eurofirst 300 <.FTEU3> was down 1 percent, hit by energy shares and after British grocer Tesco
"Weak oil and commodity prices in general are probably signalling that the recovery of the world economy is weak," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
Tokyo's Nikkei stock index closed down 0.7 percent, pulling away from 7-1/2-year highs as the stronger yen prompted investors to take profits on exporters.
Shanghai shares <.SSEC> dropped more than 5 percent for their biggest one-day percentage fall since August 2009, snapping a two-week rally fuelled in part by speculation the central bank would ease policy further.
The dollar fell 0.6 percent to 119.96 yen
"People are cutting the higher-yielding currencies which they've been funding through being short yen and that position is being reversed somewhat, which is manifesting itself in a much lower dollar/yen," said Neil Jones, head of FX hedge fund sales at Mizuho bank in London.
The dollar had earlier gained on a Wall Street Journal report that Federal Reserve officials were considering dropping an assurance that short-term interest rates would remain near zero for "a considerable time" at its Dec. 16-17 policy meeting.
However, San Francisco Fed President John Williams told Market News International on Monday that "'considerable time' captures about as best you can with two words...the appropriate time for liftoff".
The euro strengthened 0.3 percent to $1.2353 and the greenback dropped 0.2 percent against a currency basket <.DXY>.
German 10-year government bond yields
The weaker dollar pushed gold above $1,200 an ounce. It was last up 0.3 percent at $1,204.60
(Additional reporting by Wayne Cole in Sydney, Adam Rose in Beijing, Jemima Kelly and Jamie McGeever in London; Editing by Mark Potter/Ruth Pitchford)