LONDON: Global stock markets slumped on Friday as traders expressed unease over central bank policy and Britain's looming referendum on EU membership.
After a healthy run of gains for stocks helped in part by a recovering oil market, European indices were down between by over two percent, a day after European Central Bank chief Mario Draghi called for political action to help kickstart eurozone growth.
His comments were taken as a sign that the ECB's arsenal is running low following its unprecedented stimulus programme launched this week.
Wall Street opened nearly half a percentage point lower following sharp European weakness, before drifting further down.
Federal Reserve boss Janet Yellen has indicated that the US central bank is unlikely to lift interest rates until the final quarter of 2016 following weak jobs data from the world's biggest economy.
Adding to markets' unrest are fears that a Brexit vote on June 23 could unleash a wave of turmoil across world indices.
"The economic impact of the EU vote is riding high in investors' minds as they try to assess how it will affect the UK, European and global market outlook over the coming months," said Dave Jeal, head of investment products at stockbroker Interactive Investor.
"The direction of the next US interest rate decision looks clear, but the uncertainty over its timing and continuing concerns over global market growth, added to the Brexit decision, make this a time for more cautious investors to take a back seat," he added.
Around 1335 GMT, the main indices in London, Frankfurt and Paris had all lost more than two percent.
Milan's main index even slumped three percent shortly after New York's open.
Europe's main markets had already retreated by more than 1.0 percent on Thursday as Draghi again urged politicians to step up in efforts to breathe new life into the tepid eurozone economy.
The British pound lost ground against both the dollar and the euro.
Market focus was starting to turn toward next week's monetary policy meetings of the US and Japanese central banks.
The Bank of Japan earlier this year adopted a negative interest rate policy, following a similar move in 2015 by the ECB, in a bid to nurture investment. But the move has been criticised as being ineffective.
Investors worldwide are now becoming concerned about sharp inflows into bond markets, which have become a safe haven investment, pushing yields to record lows.
This, analysts say, makes the fixed-income markets vulnerable to possibly sharp losses should central banks reverse their current low-rate policies.
- Key figures around 1345 GMT -
London - FTSE 100: DOWN 2.1 percent at 6,101.69 points
Frankfurt - DAX 30: DOWN 2.5 percent at 9,839.73
Paris - CAC 40: DOWN 2.1 percent at 4,313.13
EURO STOXX 50: DOWN 2.4 percent at 2,915.95
New York - DOW: DOWN 0.7 percent at 17,861.20
New York - S&P 500: DOWN 0.2 percent at 2,115.48
New York - Nasdaq: DOWN 1.1 percent at 4,906.60
Tokyo - Nikkei 225: DOWN 0.4 percent at 16,601.35 (close)
Hong Kong - Hang Seng: DOWN 1.2 percent at 21,042.64 (close)
Shanghai - Composite: Closed for a public holiday
Euro/dollar: DOWN at $1.1287 from $1.1315 late Thursday
Dollar/yen: DOWN at 106.90 yen from 107.10 yen
Euro/pound: UP at 78.75 pence from 78.29 pence
Pound/dollar: DOWN at $1.4345 from $1.4453
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