In Europe, the FTSE 100 index of leading British shares was down 52.87 points, or 1 percent, at 5,499.04 while Germany's DAX fell 53.12 points, or 0.9 percent, to 6,155.21. The CAC-40 in France was 62.64 points, or 1.7 percent, lower at 3,672.41.
In the U.S, the Dow Jones industrial average was down 41.89 points, or 0.4 percent, at 10,697.42 soon after the open while the broader Standard & Poor's 500 index fell 5.47 points, or 0.5 percent, to 1,128.81.
The selling pressure eased for a while after the National Association of Realtors reported a bigger than expected 7.6 percent rise in US existing home sales in August.
The impact was short-lived as the seasonally adjusted annual rate of 4.13 million was the second-worst on record.
Stocks have been pressured by bad news from all fronts.
In the US, the Labor Department reported that the number of newly laid-off workers requesting unemployment benefits rose last week by 12,000 to a seasonally adjusted 465,000 after four weeks of flat or declining figures. Many economists had expected a flat reading or a small drop.
And in Europe, a survey showing a bigger than expected decline in business sentiment in September wiped out early gains. The monthly purchasing managers index, or PMI — a closely watched gauge of business activity — fell to 53.8 in September from 56.2 in August. The consensus in the markets was for a far more modest decline to 55.7.
Though the eurozone economy is growing the figures provide evidence that growth has faltered following the surprise spring surge — a reading above 50 indicates growth but the smaller the difference from 50 the lower the growth.
Particularly worrying is that the figures showed that growth in Germany, Europe's economic powerhouse, has moderated far more rapidly than anticipated — Germany was the main driver behind the 1 percent quarterly growth posted in the eurozone in the second quarter of the year.
"The export-driven uptick seen in the first part of the year is coming to an abrupt halt, as the slowdown in economic activity seen outside the eurozone during the summer has started to affect the single currency area," said Marie Diron, chief economic adviser to Ernst & Young.
Further concerns about the eurozone came in the bond markets, where investors sold off Irish and Portuguese debt, driving the borrowing costs of both countries to euro-era records amid continuing fears about heavy government debt levels in Europe.
Ireland is a particular cause for concern at the moment after government figures showed that the economy shrank by a quarterly rate of 1.2 percent in the second quarter of the year.
"Ireland's disappointing figures support our view that the economy is a long way from staging a sustained recovery and will do nothing to ease markets' fears about the health of the Irish public finances," said Ben May, European economist at Capital Economics.
Unsurprisingly, the combination of waning economic growth predictions and a return of government debt issues hit the euro, which was trading 0.6 percent lower on the day at $1.3314.
The euro had previously risen as much as 3 US cents after the Fed indicated Tuesday that it is ready to turn on the taps once again to help the faltering US economy.
The dollar's decline Wednesday was not just confined to the euro though.
It was down another 0.1 percent at 84.42 yen, barely a yen above last week's 15-year low of 84.28 yen which prompted the Bank of Japan to intervene in the markets to stem the export-sapping appreciation of its currency.
Traders remain on the lookout for another intervention from the Japanese monetary authorities — precedent suggests that the Bank of Japan will be back in the markets buying dollars and selling yen.
Trading in Asia earlier was subdued as many of the major markets including Japan, mainland China, Hong Kong and South Korea were closed for holidays.
Among markets open in Asia, Australia's benchmark stock index closed up 0.2 percent to 4,633.6. Key indices in Thailand and the Philippines posted gains, while those in New Zealand, India and Malaysia declined.
Benchmark crude for November delivery was down 57 cents to $74.14 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 26 cents to settle at $74.71 on Wednesday.
