The euro hit a 15-month high against the US currency while gold kept up a steady climb to levels not seen for 2-1/2 years as investors sought their traditional haven in the face of uncertainty.
Catalyst for the moves was a slump on Wall Street on Wednesday where stocks closed down after warnings about poor corporate earnings and another government investigation into accounting practices.
European stocks opened weaker, following the US trend but were also hurt by the continents own corporate worries. Japanese shares ended lower as well, with the prospect of a debt downgrade shadowing trade.
Euro zone government bonds rose in a flight to stable non-dollar investments. With concerns about US recovery faltering and equities weak, people dont want to hold the dollar, said one trader in London.
Despite a series of robust economic data, market concerns about Americas recovery have centred on sluggish corporate results and unease about the true nature of company accounts following the Enron debacle.
Both factors combined to hurt US equities on Wednesday. Energy trader El Paso gave a results warning, chip gear maker Novellus Systems held back a forecast because of business uncertainty and news emerged that the government was looking into accounting practices at oilfield services firm Halliburton Co.
US Vice President Dick Cheney was Halliburtons chief executive from 1995 to 2000.
The Nasdaq lost 27.78 points, or 1.68 percent, to 1624.39 and the Dow Jones industrial average shed 58.54 points, or 0.59 percent, to 9923.04.
The gloom spread to Europe where shares fell at the open. The FTSE Eurotop 300 index of pan-European blue chips was down 1 percent weaker while the narrower DJ Euro Stoxx 50 index was 1.36 percent lower. There is nothing to change the markets downward trajectory at the moment, said Gert de Mesure, head of equity strategy at Delta Lloyd Securities in Antwerp. News that a board meeting at Vivendi Universal, as the worlds second-biggest media group, failed to reveal new debt cutting measures and had set up a committee to oversee corporate governance also weighed on European stocks.