Asian stock markets, oil prices and emerging currencies all went into reverse Thursday but European equities rebounded awaiting the outcome of the ECB's first monetary policy meeting of the year.
After plunging by 3.5 percent Wednesday, London and Paris recovered slightly in late morning deals.
And while the day began brightly in Asia, volatility returned with a vengeance ahead of the close, resulting in sharp losses for Chinese and Japanese equities.
US stocks had rallied late on Wednesday but still ended with losses.
"The volatility of late is set to continue as nervous investors tread with caution ahead of the ECB meeting," said Andy McLevey, head of dealing at stockbroker Interactive Investor.
"Markets remain under pressure amid continued global economic growth concerns and weakness in the price of oil."
While the European Central Bank is not likely to announce any new policy measures on Thursday, it is expected to keep the door open for further monetary easing in the face financial markets turmoil, according to analysts.
"The ongoing decline in the price of crude oil, weakening outlook for growth in emerging economies and further softening of inflation expectations have all increased downside risks to the outlook for inflation in the eurozone," noted Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
Citing the risk of rising US inflation, the Federal Reserve in December hiked its main interest rate for the first time in almost a decade.
But with inflation stuck at low levels in Europe, the ECB and Bank of England are expected to leave European borrowing costs at very low levels for a while longer.
- Oil extends losses -
World financial markets have taken a hammering this year, chiefly hit by crashing oil prices and worries about the Chinese economy, a crucial driver of global growth.
Shanghai's main stock index slumped by more than three percent Thursday, despite a huge injection of cash into financial markets by the People's Bank of China (HKSE: 3988-OL.HK - news) (PBoC).
"The PBoC is trying to put liquidity back in the financial system after capital outflows and ahead of the lunar New Year holidays," said William Wong, head of sales trading at Shenwan Hongyuan Group.
"Sentiment is volatile and it will take some time to restore investor confidence."
Extending the trend for January, oil prices wallowed at 12-year lows, with crude under pressure from a worldwide glut, weak demand and strong dollar.
On currency markets Thursday, the dollar bounced back against emerging market currencies. However, it retreated against the yen, which is considered a go-to unit in times of uncertainty and turmoil.
In oil-rich Russia, the ruble plummeted to new record lows against the dollar, tumbling by more than 4.0 percent.
The ruble -- which has already been battered over the past 18 months by low energy prices and Western sanctions over Ukraine -- also weakened against the euro.
On the corporate front Thursday, shares in Deutsche Bank (Other OTC: DBAGF - news) plunged more than nine percent after Germany's biggest lender said that litigation costs pushed it deep into the red at the end of last year.
- Key figures around 1045 GMT -
London - FTSE 100: UP 0.4 percent at 5,694.4
Frankfurt - DAX 30: UP 0.4 percent at 9,431.4
Paris - CAC 40: UP 0.6 percent at 4,148.3
EURO STOXX 50: UP 0.6 percent at 2,898.8
Shanghai - Composite: DOWN 3.2 percent at 2,880.48 (close)
Tokyo - Nikkei 225: DOWN 2.4 percent at 16,017.26 (close)
New York - Dow: DOWN 1.6 percent at 15,766.74 (close)
Euro/dollar: UP at $1.0896 from $1.0890 Wednesday
Dollar/yen: UP at 116.97 yen from 116.92 yen