A pledge to stabilise markets from the world's leading economies failed to reassure investors today and stocks were falling sharply again.
Finance ministers from the G20 countries meeting in Washington has pledged to "take all necessary actions to preserve the stability of the banking systems and financial markets" and to make sure banks have the cash they need to pay their day-to-day expenses.
The G20 statement on Thursday mostly reiterated pledges made earlier but the show of solidarity was enough to stem the losses in Europe ahead of an expected modest advance in the US.
Asian shares, however, continued to fall sharply, with South Korea's Kospi index posting a whopping 5.7 % decline.
"The selling pressure in Europe had eased overnight but stocks are pushing deeper into the red as the morning progresses and markets remain heavily depressed on the year suggesting policymakers have their work cut out for them," said Carl Campus, an analyst at BMO Capital Markets.
The FTSE index of leading British shares was 1.7% lower at 4,955. France's CAC-40 was down 2.6 % at 2,710 while the DAX in Germany was 3 % lower at 5,010.
Wall Street was set for further falls at the opening following Thursday's slide. Dow futures were down 0.7% at 10,572 while the broader Standard & Poor's 500 futures fell 0.8% to 1,114.
While worrying about the global economy following the US Federal Reserve's warning earlier this week that the US economy faced sizeable downside risks and a raft of downbeat European and Asian economic indicators, investors continue to keep a close watch on developments in Greece.
Bank stocks have led the way down in recent days as investors fret over their potential exposure to the debts of Greece. Those fears have become more acute as the markets increasingly price in the likelihood of a Greek default.
Athens has had a series of meetings with its creditors this week to try to avoid that, but it is unclear whether it will be able to dig itself out of its debt hole, even with the help of billions from the European Union and the International Monetary Fund.
Those concerns have knocked confidence in the euro over the past week or two. After Thursday's plunge it was trading a little bit steadier, down 0.1% at 1.3458 dollars.
Several analysts think the current respite in the markets was unlikely to last since recent economic data from Europe - and even powerhouse China - has been weak and could indicate that some major economies are headed back into recession.
Jean-Pierre Jouyet, the head of the French market authority, the AMF, said that "the situation is very, very worrying. We are in a worldwide situation of crisis," pointing to debt in Japan, "imbalances" in the United States, and Europe's sovereign debt troubles.
"We must take urgent measures on the international level," he said.
Joaquin Almunia, who runs the department in the EU's executive Commission that has to clear bank bail-outs, suggested earlier this week that one of those measures may be to extend crisis rules that make it easier for governments to rescue failing lenders.
Earlier in Asia, Hong Kong's Hang Seng fell 1.4% to 17,668.83 after losing nearly 5% the day before. Australia's S&P/ASX 200 index fell 1.6% to 3,903.20.
South Korean shares took a large hit, with the Kospi tumbling 5.7% to 1,697.44. Mainland China's Shanghai Composite Index lost 0.4% to 2,433.16. Japan's market was closed for a holiday.
Oil prices were down again alongside equities - benchmark crude fell 2.10 dollars to 78.41 dollars.