Ongoing market volatility in China and sliding oil prices saw markets from Frankfurt to Moscow to New York end the week on a bearish note.
In the United States, the Dow Jones Industrial Average dropped 2.4 per cent, S&P 500 shed 2.2 per cent while tech-rich Nasdaq Composite Index tumbled 2.74 per cent.
Repercussions of the intense sell-off are expected to hit Asian bourses as they open for business tomorrow, extending the sell-off which has hit global equities since the beginning of the year.
While some analysts are already talking of recession, others say that this is too alarmist, arguing that markets are just getting used to a world that is going to grow more slowly than in the past.
"It is a perfect storm of geopolitical risks, of China rebalancing, of the strong US dollar having impact on certain parts of the American economy," Mr Song Seng Wun, CIMB Private Banking economist told The Sunday Times.
Stock markets may struggle for a time, analysts say, but they are not going to crash and they are not signalling a severe global recession.
With the markets already on edge, the Shanghai Composite on Friday dived a further 3.6 per cent due to persistent investor concerns over volatility in the yuan and a report that some banks in Shanghai have halted accepting shares of smaller listed companies as collateral for loans.
The nervousness spread to European investors who helped push Europe's benchmark Stoxx Europe 600 Index into bear market territory as it closed down 20 per cent from its record high last April.
Adding to the unease were oil prices which continued their slide, falling to levels below US$30 for the first time in 12 years. Brent oil sank on Friday to US$29.30 per barrel - a level last seen in February 2004, while New York's West Texas Intermediate dived to US$29.28 - a low dating back to Nov, 2003.
One factor was Russia, where the energy-dependent economy has been hurting from the plunge in oil prices. Moscow stocks dropped over six per cent as the ruble followed oil prices lower, sliding 2.2 per cent to 77.735 to the US dollar.
The losses topped off a rollercoaster week as a better-than-expected reading on Chinese trade failed to ease heightened worries about the health of Asia's powerhouse economy.
"This is one of these market moments when fear trumps all rationality," said chief market strategist at Bank of America Private Wealth Management Joe Quinlan. "We will have to work through this panic period to move forward."
More than US$5 trillion (S$7.2 trillion) has been erased from global equities in the most dismal start to any year on record. At Friday's close, more than half of the 45 markets tracked by Bloomberg had entered a bear market decline of at least 20 per cent from their recent peaks.
Since June, global equities have lost more than US$14 trillion, or 20 per cent. Investors fled into the US debt market and pushed the yield on the 10-year note below 2 per cent for the first time in months.
The world's billionaires also suffered again as a result of the turmoil, losing more than US$115 billion this week, with 76 taking hits of at least US$1 billion this month, according to the Bloomberg Billionaires Index. Seven shed more than US$1 billion on Friday alone as the Dow tumbled.
Analysts said the lack of a solid growth driver to the global economy is to blame for the current rout.
"It comes down to one basic fear, which is the global economy," global chief investment strategist for BlackRock Russ Koesterich told Bloomberg. "What people are afraid of is (that) this isn't investors overreacting but reflects a fundamental deterioration in growth."
Mr Roger Tan, chief executive of Voyage Research, told The Sunday Times that developments like the technology movement or Internet movement have always pulled the world out of a crisis, but now the only thing keeping the global economy alive has been monetary easing. "The world lacks that next growth impetus." WIRES
•Additional reporting by Wong Siew Ying
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