Stock markets came under heavy selling pressure after election deadlock in Italy sparked fears of more uncertainty in the eurozone.
The FTSE 100 Index was more than 1% lower, while markets in France and Germany were down by around 2% in the wake of the inconclusive poll result.
Adding to the downbeat mood were weak manufacturing figures from China and the prospect of spending cuts in the United States as politicians struggle for an agreement to trim the budget deficit this week.
The Dow Jones Industrial Average slid by 1.5% on Wall Street on Monday night, while Asian markets were down by a similar level.
The election result in Italy is expected to make it harder for the country to pass the reforms it needs to overhaul its debt-laden economy. While the centre-left coalition looks to have won control of the country's lower house they were unable to secure a majority in the Senate.
Rebecca O'Keeffe, head of investment at Interactive Investor, warned of increased volatility in the coming weeks after Italian voters served up the worst possible outcome for investors.
She said: "Equity markets have reacted swiftly and severely - giving up yesterday's gains and more.
"While an attempt at a coalition government may yet be made, no overall control seems the most probable outcome, with a second vote likely in the months ahead."
The FTSE 100 Index had been trading near to its recent five-year high on Monday, despite the downgrade of Britain's AAA rating by Moody's.
Banking stocks were hardest hit by the eurozone uncertainty, with Barclays off 14p at 297.7p, Royal Bank of Scotland down 11.75p at 342.85p and Lloyds Banking Group 1.5p lower at 53.4p.