Fresh tensions between Washington and Beijing came into focus but appeared to have little impact, after U.S. President Donald Trump again raised the idea of decoupling the U.S. and Chinese economies.
"I think the market will shrug this off as electioneering but may find the lining up of technology stock sellers harder to process as the U.S. market returns from a holiday yesterday," said Chris Bailey, European Strategist at Raymond James.
MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 2.08% following broad declines in Europe and modest gains in Asian markets.
On Wall Street, the Dow Jones Industrial Average fell 632.75 points, or 2.25%, to 27,500.56, the S&P 500 lost 95.14 points, or 2.78%, to 3,331.82 and the Nasdaq Composite dropped 465.44 points, or 4.11%, to 10,847.69.
While many market players were unable to pinpoint a single trigger for the Nasdaq's plunge, valuations have been stretched given its approximately 75% gain from a bottom hit in March with big bets on the option market possibly creating extra turbulence.
"Whatever the reason ... tech and growth investors have to decide whether this is a chance to buy on the dips - yet again - or a call to lock in what could be substantial profits," said AJ Bell Investment Director Russ Mould.
In foreign exchange markets, the dollar rose slightly against a basket of currencies <=USD> at 93.291 and stood up against the euro <EUR=EBS> at $1.1800 with the main focus on Thursday's ECB policy meeting.
Most analysts do not expect a change in the central bank's policy stance but are looking at its inflation forecasts and whether an accommodative tone could help cool down the surge in the bloc's single currency.
"I think the ECB's message will be clearly dovish, given the latest numbers on inflation and the recent rally in the euro," said Pasquale Diana, Senior Macro Economist at investment manager AcomeA SGR.
Investors moved into the perceived safety of U.S. government bonds. Benchmark 10-year notes last rose 12/32 in price to yield 0.6853%, from 0.723% late on Friday.
Concerns also rose about the path of Britain's exit from the EU after the head of the UK government's legal department quit over suggestions that Prime Minister Boris Johnson was threatening to override parts of the Withdrawal Agreement treaty signed in January, increasing the chances of a disorderly Brexit.
Oil fell on worries that a recovery in demand could weaken as coronavirus infections flare up around the world.
U.S. crude recently fell 7.19% to $36.91 per barrel and Brent was at $40.07, down 4.62% on the day.
By David Randall