Equities on both sides of the Atlantic slid overnight as concern about the global economy, spurred by reports including a surprise drop in Germany's factory orders, returned to the forefront of investors' minds.
Also, shares of Allergan tanked, last 15.3 percent lower in afternoon trading in New York, amid concern about that Pfizer's US$160 billion planned takeover of the Dublin-based company might be thwarted by new US tax measures.
Pfizer is leaning toward abandoning its agreement to buy Allergan because of the new measures aimed at curbing tax-evading corporate deals, Reuters reported, citing a source familiar with the situation.
"By how the stocks are trading, the market thinks the deal is almost dead," Les Funtleyder, healthcare portfolio manager at E Squared Asset Management in New York, whose firm holds Pfizer shares, told Reuters. Pfizer shares rose in afternoon trading.
Meanwhile, researchers at the Institute of International Finance, a Washington-based association that represents close to 500 financial institutions from 70 countries, say the chances of a US downturn within two years are at around 30 to 35 percent due to the earnings slump, up from 20 to 25 percent, Bloomberg reported.
In their April "Capital Markets Monitor," IIF executive managing director Hung Tran and his team blamed the global decline in earnings on poor productivity growth, weak demand and a general lack of pricing power.
"In the past, if you had poor performance at home, you could recoup and compensate for that with overseas investment," Tran told Bloomberg. "But if you suffer declines in profits domestically and internationally, you tend to retrench."
Wall Street moved lower. In 1.01pm New York trading, the Dow Jones Industrial Average fell 0.7 percent, while the Nasdaq Composite Index dropped 1 percent. In 12.46pm trading, the Standard & Poor's 500 Index slid 0.9 percent.
Declines in shares of Walt Disney and those of Cisco Systems, down 2.4 percent and 2.2 percent respectively, led the Dow lower.
Bucking the trend were shares of Pfizer and those of Boeing, up 2.6 percent and 1 percent respectively in early afternoon trading.
US Treasuries advanced, pushing yields three basis points lower to 1.73 percent.
"We're not an island in the world, and these global concerns have affected us," Aaron Kohli, a fixed-income strategist at BMO Capital Markets in New York, told Bloomberg.
"The big question now is the persistence of that turmoil."
In Europe, the Stoxx 600 Index finished the session with a 1.9 percent slide from the previous close, led by declines in miners and car makers, including PSA Peugeot Citroen.
The UK's FTSE 100 Index retreated 1.2 percent, while France's CAC 40 Index dropped 2.2 percent.
Germany's DAX Index gave up 2.6 percent, after a report showed a surprise decline in German factory orders in February, boosting concern about Europe's largest economy.