Meanwhile the dollar sagged on worries about the US economy after a steep drop in home builder sentiment and oil prices fell half a percent despite OPEC production cuts in what was a brutal day for investors' risk sentiment.
News around Apple Inc triggered the latest bout of stock market selling, after the Wall Street Journal reported the consumer tech giant is cutting production for its new iPhones.
This hit world stock markets with the European tech sector sinking 2 percent and hitting its lowest level since February 2017 as stocks supplying chips to Apple suffered, following Asian tech stocks lower.
The selloff was compounded by an auto sector drop led by Nissan and Renault after Ghosn, chairman of both carmakers, was arrested in Japan for alleged financial misconduct.
The European auto sector was not far behind, dropping 1.6 percent, and the broad European STOXX 600 index was down 0.9 percent to a four-week low.
"Most of Europe had a red session yesterday and that has been compounded by the news on Apple and tech stocks overnight, The overall climate is risk off," said Investec economist Philip Shaw.
"Beyond stocks, the Italian bonds spread (over German bonds) is at its widest in about a month now, and Brexit continues to rumble on - uncertainty is very much hurting risk sentiment," he added.
Italian government bond yields jumped to one-month high on Tuesday and Italian banking stocks dropped to a two-year low, hurt by risk aversion and concerns over the Italian budget.
Euro zone money markets no longer fully price in a 10 basis point rate rise from the European Central Bank in 2019, indicating growing investor concern about the economic outlook in the currency bloc.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.2 percent, with Samsung Electronics falling 2 percent. In Japan, Sony Corp shed 3.1 percent.
Japan's Nikkei slipped 1.1 percent, with shares of Nissan Motor Co tumbling more than 5 percent after Ghosn's arrest and on news he will be fired from the board this week.
Global stock markets have suffered a sharp shakeout in the past two months, pressured by worries of a peak in corporate earnings growth, rising borrowing costs, slowing global economic momentum and international trade tensions. Trillions of dollars were wiped off equities in a particularly torrid October month.
In currencies, the dollar struggled at a near two-week low against a basket of currencies.
Data released on Monday showed US home builder sentiment recorded its steepest one-month drop in over 4-1/2 years in November.
The dollar had also been weighed down after Fed Vice Chair Richard Clarida and Dallas Fed President Robert Kaplan raised concerns late last week about a possible global slowdown.
The US currency has rallied strongly this year, buoyed by three Fed rate increases and a robust economy, though some expect the bull run may be nearing an end.
Oil prices lost steam as fears about slower global demand and a surge in US production outweighed expected supply cuts by the Organization of the Petroleum Exporting Countries (OPEC).
Brent crude slipped 0.9 percent to $66.21 per barrel.
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