Wall Street's Dow Jones was down 2% in mid-morning trading, having earlier fallen 6%, The BBC reported.
London's FTSE 100 index was 3.9% lower in late afternoon trade, with major markets in France and Germany down by 4.6% and 3.8% respectively.
The sell-off hit stocks across almost every sector in New York.
The Dow Jones at one point fell below 16,000 for the first time since February 2014, while the technology-heavy Nasdaq index was 2.4% lower in morning trade, recovering from an earlier plunge of 8%.
Shares in Asia were hit overnight, with the Shanghai Composite in China closing down 8.5%, its worst close since 2007.
At its lowest point in the day, the FTSE 100 had lost as much as 6%, wiping some GBP 100 billion off its value.
Global investors are worried about growth in the world's second largest economy.
