Equities on both sides of the Atlantic fell again, while government bonds rose, as the US Federal Open Market Committee began its two-day meeting, while new polls bolstered concern British voters might opt to leave the European Union.
Investors piled into the safe-haven of German bunds, sending their yields into record negative territory. The 10-year bund yield fell as low as minus 0.032 percent, according to Reuters.
"The market is really afraid of the uncertainty of what the outcome will actually be," Tony Bedikian, head of global markets at Citizens Bank in Boston, referring to a potential British exit from the EU, or Brexit, told Reuters.
The US dollar also benefitted from the flight to safety.
"Investors continue to shun riskier assets and savour traditional safe harbours," Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange, told Bloomberg. "High-beta currencies are trending lower against the [US] dollar."
An asset with a high beta suggests it's more volatile than the overall market.
Wall Street weakened as well as investor geared up for the Fed's statement and Fed Chair Yellen's comments after the policy meeting ends on Wednesday. In 2.51pm New York trading, the Dow Jones Industrial Average slid 0.64 percent, while the Nasdaq Composite Index declined 0.46 percent. In 2.36pm trading, the Standard & Poor's 500 Index fell 0.49 percent.
A better-than-expected US retail sales report failed to shore up sentiment.
"It was nice to see a good retail sales number, but folded on top of that you have Brexit, speculation around the Fed and the market still near some highs," Richard Sichel, chief investment officer at Philadelphia Trust, told Bloomberg. "That's causing investors to remain cautious. The news cycle has been taken over by what the Fed is going to do."
A Commerce Department report showed retail sales climbed 0.5 percent in May, following an unrevised 1.3 percent in April.
"This won't spur the Fed to raise interest rates tomorrow, but it could cast a more positive tone on the statement... setting the stage for an increase in July," Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Reuters.
Declines in shares of American Express and those of Home Depot, down 24.6 percent and 2.1 percent respectively, led the Dow lower. Bucking the trend were shares of General Electric and those of Wal-Mart, last trading 1.6 percent and 0.97 percent higher respectively.
In Europe, the Stoxx 600 Index finished the session with a fall of 1.9 percent from the previous close. Germany's DAX index decreased 1.4 percent, the UK's FTSE 100 index dropped 2 percent, while France's CAC 40 index sank 2.3 percent.
The latest polls about the June 23 referendum on the UK's membership of the European Union are showing British voters might favour a Brexit, sparking an array of concerns for investors.
"Brexit is one out of a whole bag of unresolved points right now," Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany, told Bloomberg.
"There are also questions about the actions of the Bank of Japan, the Bank of England, the Fed, the European Central Bank's bond buying, company earnings," Sonnenschein noted.
"For investors, the glass is half empty and not half full at the moment-there is a lot of combined nervousness."