Global stocks have fallen again after fears of a possible US recession combined with worries over Europe's debt crisis.
However, a better than anticipated opening on Wall Street helped European markets recoup a large chunk of their earlier losses.
"This week has seen a continuation of the trend of weaker than expected data and political reaction to the European problems which pretty much amounts to 'Let's have a get together a couple of times a year', " said Gary Jenkins, an analyst at Evolution Securities.
Britain's FTSE 100 lost 0.7% to 5,056, while Germany's DAX fell 2.1% to 5,483. France's CAC-40 was down 1.2% at 3,041.
In the US, the Dow Jones industrial average was down 0.6% at 10,931 while the broader Standard & Poor's 500 index fell 0.1% at 1,140. Futures markets had earlier been predicting far bigger declines.
The market turmoil of the last two days has dashed any hopes of a quiet second half of August - a normally quiet period when trading dries up until the US returns from the Labour Day holiday in early September.
Financial markets have wrestled for several weeks with fears that a new recession in the US is in the offing. Another round of soft economic data further spooked investors all round the world.
A woeful manufacturing survey from the Federal Reserve Bank of Philadelphia renewed US recession fears in particular.
A parallel concern centres on Europe after a Franco-German summit earlier this week failed to persuade investors a convincing fix to the spiralling debt crisis was imminent. The leaders promised further economic integration but no concrete measures like eurobonds, which would spread the risk among the 17 nations using the common currency.
Earlier, Asian shares also took a beating following the big retreat in Europe and the US. Japan's Nikkei 225 index dropped 2.5% to 8,719.24 and Hong Kong's Hang Seng slid 3.1% to 19,399.92.