Fears of steep losses at U.S. bank Citigroup and Asian industry giants such as Sony pummeled shares on Tuesday and bolstered government debt.
The euro slid to a one-month low against the dollar and the yen as the European Central Bank looked set to cut interest rates again this week, while oil continued to drop on fears about reduced energy demand as the world economy shrinks.
Two-year euro zone government bond yields briefly fell to their lowest since the launch of the euro in 1999, according to Reuters charts, as a new wave of risk aversion took hold.
Oil fell more than $1 a barrel to its lowest in more than two weeks, as investors grew more pessimistic about energy demand on signs the world economy will slow down sharply.
U.S. light crude for February delivery fell $1.19 to $36.40 a barrel by 0715 GMT (2:15 a.m EST), the weakest level since December 26.
The ECB is expected to cut interest rates by a half point to 2 percent on Thursday, according to a Reuters poll.
"Earnings and economic disappointments are the main contributors to the rise in risk aversion, both of which are likely to act as a persistent drag on markets over coming weeks," Calyon analysts said in a note to clients on Tuesday.
MSCI's all-country world index .MIWD00000PUS was down about 1.5 percent, its fifth negative performance in a row.
European shares also slipped for a fifth straight session, trading 2.1 percent lower and tracking losses in the U.S. and Asia, as investors worried that big companies might post poor results in the current earnings reporting season. .EU
BRACED FOR POOR RESULTS
U.S. banking giant Citigroup (C.N) could record a fourth-quarter operating loss of over $10 billion, the Wall Street Journal reported on Monday, while U.S. aluminum producer Alcoa (AA.N) announced a fourth-quarter loss.
Asia's export companies are also hurting as major overseas markets such as the United States are mired in recession.
Japan's Sony Corp (6758.T) will likely suffer an annual operating loss of about $1.1 billion, its first such loss in 14 years, a person with knowledge of the matter said.
Toshiba Corp (6502.T) expects a loss of about $2.2 billion according to Japanese media reports. Shares in both companies shed more than 8 percent in response.
Japan's Nikkei .N225 fell 4.8 percent, after being closed on Monday for a public holiday.
