Losses in London, Paris and Milan were already climbing towards 2 percent in early trading, although the selloff wasn't quite as dramatic as the overnight session in Asia.
MSCI's broadest index of Asian shares not including Japan ended down 3.6 percent, having struck its lowest level since March 2017. China's main indexes had slumped over 5 percent.
It meant MSCI's 24-country emerging market index was having its worst day since early 2016, after Wall Street's swoon had given the 47-country world index equivalent its worst day since February.
"Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty," summed up analysts at ANZ.
The sell-off, which came as the head of the International Monetary Fund, Christine Lagarde, said stock market valuations have been "extremely high", erased hundreds of billions of dollars of global wealth .
Japan's Nikkei ended down 3.9 percent, its steepest daily drop since March. The broader TOPIX lost around $207 billion in market value, falling 3.5 percent.
Shanghai's drop was its most severe since February 2016 and left it at its lowest level since late 2014. Shares in Taiwan were even harder hit, losing 6.3 percent. Seoul's Kospi index dropped 3.8 percent.
"I think what happened was that we were a maximum elevation of risk appetite and maximum valuation of (US) large caps and tech, so when you have that situation you are always vulnerable," said UBP macro and FX strategist Koon Chow.
Europe's traders retreated to the safety of German and other higher-rated government bonds.
Italian bonds aren't on that list, and they saw more selling before a key set of auctions, amid ongoing concern about the country's financial health.
"It remains to be seen whether the accelerating equity plunge is a healthy correction or the tip of the iceberg," Commerzbank analysts said in a note. "For sure it creates a more challenging environment for today's (Italian) auctions."
BLOOD ON THE STREET
Sinking global shares have raised the stakes for US inflation figures due later on Thursday. High inflation would only stoke speculation of more aggressive rate hikes from the Federal Reserve.
On Wall Street, the S&P500's sharpest one-day fall since February wiped out around $850 billion of wealth as technology shares tumbled on fears of slowing demand.
The S&P 500 ended Wednesday with down 3.29 percent, the Nasdaq Composite 4.08 percent and the Dow 2.2 percent.
The bloodletting attracted the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.
"I really disagree with what the Fed is doing," Trump told reporters before a political rally in Pennsylvania. "I think the Fed has gone crazy".
Hawkish commentary from Fed policymakers triggered the sell- off in Treasuries last week and sent long-term yields to their highest in seven years.
The surge made stocks look less attractive compared with bonds while also threatening to curb economic activity and profits.
"The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook," said Steven Friedman, senior economist at BNP Paribas Asset Management.
"It is also possible that equity investors are growing concerned that the Federal Reserve's projected rate path will choke off the expansion."
YUAN A FLASHPOINT
The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States.
China's move has forced other emerging-market currencies to weaken to stay competitive and drawn the ire of the United States, which sees it as an unfair devaluation.
"The yuan has already weakened significantly, to offset the tariffs announced so far," said Alan Ruskin, Deutsche's global head of G10 FX strategy. "Further weakness could exacerbate concerns of a self-fulfilling flight of capital and a loss of control."
The dollar was already losing ground to both the yen and the euro, as investors favoured currencies of countries that boasted large current account surpluses.
The euro was at $1.1550, up from a low of $1.1429 early in the week. The dollar lapsed to 112.17 yen, a retreat from last week's 114.54 peak.
That left the dollar at 95.263 against a basket of currencies.
In commodity markets, gold struggled to get any safety bid and edged down to $1,192.77. Oil prices skidded in line with US equity markets, even though energy traders worried about shrinking Iranian supply from US sanctions and kept an eye on Hurricane Michael, which shut down some US Gulf of Mexico oil output. Brent crude fell 1.6 percent to $81.75 a barrel. US crude dropped 1.5 percent to $72.07 .