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"The markets are trapped in a vicious circle," said Alexandre Baradez, an analyst at IG France.
Stock markets around the world fell heavily Friday as investors reacted to new 12-year lows for oil prices and a big drop in Chinese equities.
A 3.6 percent drop in the Shanghai index pushed the Chinese market into an official bear market -- defined as a 20 percent fall from a recent high -- and sparked a wave of selling that extended from Frankfurt to Moscow to New York.
"Pervasive gloom," read the title of a Barclays note.
Barclays slashed its forecast for oil prices due to a "worsening" macro outlook and predicted further European Central Bank stimulus in light of deflationary worries. On the positive side, the "pessimism about US growth is overdone in light of solid labor market momentum," Barclays added.
"The markets are trapped in a vicious circle," said Alexandre Baradez, an analyst at IG France.
"The session started off poorly with China, which set things off, leading to oil prices falling, then European markets and Wall Street dropping."
Frankfurt fell 2.4 percent, Paris 2.3 percent and London 1.9 percent. The Dow in the US ended 2.4 percent lower after dropping more than 3.0 percent earlier in the session.
The leading Moscow index dropped 5.8 percent, while Brazil's Ibovespa index lost 2.4 percent.
- Global recession? -
The widespread market losses over the start of 2016 has sparked talk of the potential for a global recession.
David Levy, portfolio manager at Kenjol Capital Management, said such a downturn would likely be less severe than in 2008 because fewer assets are overvalued.
"Even if we are in a global recession, I don't think the damage will be nearly as significant as a 2008-type event," Levy said.
"But certainly the evidence is giving us a higher probability of recession in 2016 and certainly the market is speaking that it believes that is a possibility."
US oil benchmark West Texas Intermediate finished at $29.13 a barrel, taking the losses since the beginning of the year to more than 21 percent.
Industrial metals, including copper, also fell, but safe-haven gold gained.
"Investors are shifting funds into areas of perceived safety including gold and government bonds in hopes of protecting themselves," said Jasper Lawler at CMC Markets UK.
- Automakers skid lower -
European auto stocks tumbled again, with Renault shedding an additional 3.4 percent after unions reported Thursday that anti-fraud investigators had raided several of the company's sites.
Renault ended 10.3 percent lower on Thursday on the news, which raised fears of a Volkswagen-type scandal.
Shares in Peugeot, France's biggest automaker ahead of Renault, fell 2.6 percent in Paris while Renault alliance partner Nissan's stock closed 1.9 percent lower in Tokyo.
Daimler shares lost 1.9 percent, BMW 2.6 percent and Volkswagen 3.5 percent.
In the US, investors hammered banking shares after Citigroup set aside $250 million in reserves for its energy portfolio and warned of a deeper hit if oil prices fall further.
Citigroup tumbled 6.4 percent, while Wells Fargo, which also reported a higher hit from oil, lost 3.6 percent.
Petroleum and technology were two other weak sectors, while Disney tumbled 5.3 percent following a downgrade by Barclays due to worries about sports network ESPN's prospects.
- Key figures around 2200 GMT -
New York - Dow: DOWN 2.4 percent at 15,988.08 (close)
New York - S&P 500: DOWN 2.2 percent at 1,880.29 (close)
New York - Nasdaq Composite: DOWN 3.1 percent at 4,488.42 (close)
London - FTSE 100: DOWN 1.9 percent at 5,804.10 points (close)
Frankfurt - DAX 30: DOWN 2.5 percent at 9, (close)
Paris - CAC 40: DOWN 2.4 percent at 4,210.16 (close)
EURO STOXX 50: DOWN 2.4 percent at 2,952.48 (close)
Tokyo - Nikkei 225: DOWN 0.5 percent at 17,147.11 (close)
Shanghai - Composite: DOWN 3.6 percent at 2,900.97 (close)
Euro/dollar: UP at $1.0916 from $1.0865 Thursday
Dollar/yen: DOWN at 116.96 yen from 118.06 yen
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