Stock markets across the globe have fallen amid persistent US interest rate jitters amid fears that oil prices could spur inflation.
Oil prices are finally drifting lower
Wall Street's Dow Jones wiped out early gains made on positive company news to close 31.38 points down at 10,285.98.
The slide came despite oil prices dropping to near the $61 a barrel mark, as the fall triggered a drop in the price of heavyweight oil companies.
In Europe the key Dax, Cac and FTSE markets sank more than 50 points.
Wall Street's drop came a day after the market slumped on comments from a Federal Reserve official who warned the central bank needed to stay alert to potential inflation pressures caused by rising energy prices.
On Thursday, Dallas Fed President Richard Fisher said he stood by his belief that inflation was rising near the high end of the Fed's comfort zone and could soon begin to bite - prompting shares to retreat from highs hit in early morning trade.
Worries ahead of key US payroll data, due out on Friday, also added to jitters about the strength of the US economy - which the Fed still expects to grow solidly in 2006 and beyond.
However, European shares still recorded their biggest daily fall since the 7 July bombings in London as concerns over the future of interest rates knocked sentiment and shares in oil heavyweights tracked crude prices lower.
Both the Bank of England and the European Central Bank decided to keep their rates on hold this month.
In London, the FTSE 100 market was also hurt by weak manufacturing figures. The FTSE 100 index closed 55.40 points lower at 5,372.4.
Both Germany's Dax index and France's benchmark Cac 40 closed sharply lower - the Dax sank 52.15 points to 5,017.27 while the CAC dropped 57.21 to 4,536.9.
Other world markets also had the jitters on Thursday, with the Heng Seng in Hong Kong down 269 points to 14,891 and Japan's Nikkei index down 330 at 13,359.
"The market has risen very quickly and this is a healthy correction," said Masaki Iso, chief investment officer at Yasuda Asset Management.