Stocks on both sides of the pond fell overnight amid a flurry of disappointing economic data including US retail sales and industrial production in the euro zone, underpinning concern about the outlook for corporate profits.
Commerce Department data showed that said US retail sales slid more than expected in October, dropping 0.3 per cent following a 1.3 per cent gain that was bigger than previously reported in September.
Then there is the uncertainty of the fiscal cliff overhanging the US economy.
President Barack Obama will begin budget negotiations with congressional leaders on Friday by calling for US$1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the US$800 billion discussed in talks with GOP leaders during the summer of 2011, according to the Wall Street Journal.
"The recent wall of worry continues to mount," Ryan Larson, the Chicago-based head of US equity trading at RBC Global Asset Management (US), told Bloomberg News.
"Middle East geo-political tensions, continued sovereign concerns about Greece and Spain, indecision ahead of the fast-approaching fiscal cliff and the fact that the major US indices continue to trade under key technical levels are all weighing on sentiment."
In afternoon trading in New York, the Dow Jones Industrial Average fell 0.65 per cent, the Standard & Poor's 500 Index dropped 0.46 per cent and the Nasdaq Composite Index declined 0.34 per cent.
Indeed, the mood in Europe was sombre too. The Stoxx 600 Index fell 0.9 per cent. The FTSE 100 shed 1.1 per cent, while both Germany's DAX and France's CAC 40 each closed down 0.9 per cent.
The latest economic data only pointed to a further slowdown amid the ongoing debt crisis in the euro zone. The region's industrial production sank the most in more than three years in September, dropping a bigger-than-expected 2.5 per cent from August, according to the EU's statistics office.
Meanwhile, Greece's economy suffered a contraction for the 17th consecutive quarter, shrinking 7.2 per cent in the third quarter from the same period last year.
There were pockets of optimism.
Shares of Cisco received a lift, last up 5.1 per cent, from better-than-expected earnings.
Abercrombie & Fitch shares soared more than 27 per cent after the teen clothing retailer lifted its full-year forecast.
And Facebook shares climbed 8.8 per cent. The latest end to a restriction of share sales by former employees and those who sold at the initial public offering today nearly doubled the total number of shares publicly available, according to Bloomberg.
"Some of the investors are thinking the worst is behind Facebook and now is maybe the time to go long on the stock," Victor Anthony, an analyst at Topeka Capital Markets in New York, told Bloomberg.