Global stock markets sank Friday after the Dow Jones industrials on Wall Street plummeted more than 1,000 points, deepening a weeklong sell-off.
Markets followed U.S. stocks lower after the Dow, coming off a record high, entered a "correction" — that is, a 10% decline from its latest peak — for the first time in two years.
In Europe, France's CAC 40 lost 1.2% to 5,087, Britain's FTSE 100 shed 0.7% to 7,122 and Germany's DAX fell 1.2% to 12,110. All three had dropped around 2% the day before.
Asian markets fell more sharply. The Shanghai Composite Index tumbled 5.5% before ending the day down 4% at 3,129.85. Tokyo's Nikkei 225 lost 2.3% to 21,382.62 and Hong Kong's Hang Seng retreated 3.1% to 29,507.42.
On Wall Street, futures for the Dow and the Standard & Poor's 500 were down 0.1% and up 0.2%, respectively, though the actual market open does not always follow the futures closely in times of volatility.
Financial analysts regard corrections as a normal event but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors. Those include worries about a potential rise in U.S. inflation or interest rates and whether budget disputes in Washington might lead to another government shutdown.
"Markets are down again today, maybe unnerved by fears that the U.S. Senate will not pass a budget bill in time to avoid a U.S. government shutdown," said Rob Carnell of ING in a report. "With financial markets vulnerable at the moment, this was not great timing for such political brinksmanship."
Chinese markets fell despite unexpected strongly trade data Thursday. Elsewhere in Asia, Seoul's Kospi fell 1.8% to 2,363.77 and Sydney's S&P-ASX 200 lost 0.9% to 5,838.00. India's Sensex retreated 1.1% to 34,017.83 and benchmarks in New Zealand, Taiwan and Southeast Asia also fell.
In Europe, markets were unnerved also by the Bank of England's indication on Thursday that it could raise its key interest rate in coming months due to stronger global economic growth.
U.S. stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January.
Investors worried rising wages will hurt corporate profits and could signal an increase in inflation that could prompt the Federal Reserve to raise interest rates at a faster pace, putting a brake on the economy.
On Wall Street, many companies that rose the most over the last year have borne the brunt of the selling. Facebook and Boeing have both fallen sharply.
The S&P 500, the benchmark for many index funds, shed 100.66 points, or 3.8%, on Thursday to 2,581. Even after this week's losses, the S&P is up 12.5% over the last year. The Nasdaq composite fell 274.82 points, or 3.9%, to 6,777.16.
The market, currently in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time. Many market watchers have been predicting a pullback, saying stock prices have become too expensive relative to company earnings.
"We may have seen the worst, but it's too early to say for sure. However, our view remains that it's just another correction," said Shane Oliver of AMP Capital in a report.
Corrections of up to 15% "are normal," he said.
"In the absence of recession, a deep bear market is unlikely," he said.
American employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1%. The housing industry is solid and manufacturing is rebounding.
4:40 am.: Updated with Wall Street futures mixed.
2:50 a.m.: Updated with European trading.