Stocks slid in both Europe and on Wall Street overnight with oil prices tumbling amid concern the slump in energy could crimp global economic growth.

US crude futures dropped below US$50, touching US$49.95, before recovering to US$50.23 in early afternoon trade in New York. The release of weekly oil inventory numbers for the United States on Wednesday might spell more trouble.

"We're headed for a four-handle," Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York, told Reuters. "Maybe not today, but I'm sure when you get the inventory numbers that come out this week, we definitely will."

In afternoon trading in New York, the Dow Jones Industrial Average dropped 1.8 per cent, the Standard & Poor's 500 Index slid 1.8 per cent, while the Nasdaq Composite Index fell 1.45 per cent.

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Declines in shares of DuPont and those of Home Depot, down 2.6 per cent and 2.4 per cent, led the Dow lower.

US Treasuries, meanwhile, rose as investors sought their perceived safety amid a lack of inflationary pressures.

"Lower oil obviously means lower inflationary pressures with the fear of deflation overhanging the market - another positive for bonds," Gary Pollack, head of fixed-income trading at Deutsche Bank's Private Wealth Management unit in New York, told Bloomberg News.

Indeed, bond guru Bill Gross said the US Federal Reserve may not even lift interest rates this year.

"With the dollar strengthening and oil prices declining, it is hard to see even the Fed raising short rates until late in 2015, if at all," Gross, who oversees the Janus Global Unconstrained Bond Fund, said in an outlook published on the Janus Capital Group website.

"With much of the benefit from loose monetary policies already priced into the markets, a more conservative investment approach may be warranted by maintaining some cash balances. Be prepared for low returns in almost all asset categories," according to Gross.

In Europe, the Stoxx 600 Index finished the session with a 2.2 per cent retreat from the previous close. The UK's FTSE 100 Index fell 2 per cent, Germany's DAX Index dropped 3 per cent, while France's CAC 40 Index sank 3.3 per cent. Greece's ASE Index plunged 5.6 per cent.

Renewed talk about a potential Greek exit from the euro zone has sparked concern about a dangerous precedent. Indeed, the euro weakened 0.7 per cent against the US dollar, and fell against the Japanese yen.

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"It would be a nasty precedent if Greece leaves as it could stimulate others to do the same, making it the first step of euro fragmentation," Carsten Brzeski, chief economist at ING-DiBa in Frankfurt, told Bloomberg News. "The fact remains that losing one member of the family would ultimately open Pandora's box."

Separately, a report showed Germany's inflation eased to 0.1 per cent in December, the lowest rate since October 2009, bolstering the case for the European Central Bank to help fuel the region's largest economy through quantitative easing.

"Germany's inflation rate almost hit freezing point in December," said Marco Wagner, an economist at Commerzbank AG in Frankfurt, told Bloomberg News. "A negative euro-zone inflation rate would reinforce the call from the ECB council doves for more QE."