Crude oil futures have plummeted almost 10 percent since last Thursday while world stock markets have tumbled to 19-month lows.
Investors expected the U.S. Federal Reserve to announce one more interest rate hike at a policy meeting later in the day, but they speculated that the U.S. central bank might signal that it plans to stop tightening monetary policy.
"Financial market volatility, falling inflation expectations, and pockets of slowing growth will likely combine to produce a dovish hike in December", BNP Paribas told clients.
MSCI's index of stocks around the globe rose 0.7 percent, boosted by broad gains in Europe and the U.S., though it remains down nearly 12 percent since the start of December.
On Wall Street, the Dow Jones Industrial Average rose 169.77 points, or 0.72 percent, to 23,845.41, the S&P 500 gained 19.45 points, or 0.76 percent, to 2,565.61 and the Nasdaq Composite added 61.22 points, or 0.9 percent, to 6,845.13.
U.S. stocks are on pace for their biggest December declin
e since 1931, the depths of the Great Depression. https://tmsnrt.rs/2A3z5ML
The latest jolt on the growth front came from Japan, which said its export growth slowed to a crawl in November, an ominous signal for the trade-focused economy.
Logistics and delivery firm FedEx, considered a bellwether for the world economy, slashed 2019 forecasts, noting "ongoing deceleration" in global growth.
"It's a confluence of several important factors: the market is adjusting its outlook on growth and there is a consensus we will see a slowdown. More importantly, the market is adjusting to the idea this will translate into lower earnings growth," said Norman Villamin, chief investment officer for private banking at Union Bancaire Privee in Zurich.
"It's being complicated by the tightening liquidity situation with the Fed expected to move today and the ECB having signaled the end of its (stimulus)".
Expectations of a Fed pause and the equity sell-off have sent 10-year Treasury yields to their lowest since August. Benchmark 10-year notes <US10YT=RR> last rose 2/32 in price to yield 2.8156 percent, from 2.823 percent late on Tuesday.
Yields in Japan and Australia also reached multi-month lows.
The dollar index <.DXY> fell 0.49 percent, with the euro up 0.57 percent to $1.1426.
(Reporting by David Randall; Editing by David Gregorio)
By David Randall