Wall Street closed sharply lower and European indices also fell despite closely watched US inflation data indicating the price surge seen in recent months may be easing.
Traders have feared that rising inflation could force the Federal Reserve to pull back on stimulus measures that have helped equities post massive gains during the economic crisis caused by Covid-19, but Labor Department data released before US trading began on Tuesday showed price increases ebbed in August.
"It looks like the Fed may have got inflation right," said analyst Edward Moya at OANDA.com, referring to the central bank chief's assertion that the price spike will be temporary, meaning it will not have to rush to pull back on the massive bond purchases implement to ease lending conditions.
"An inflation slowdown could be what is needed to justify their taper delay and suggests they have a couple more months to see how the labor market recovery unfolds."
But as traders digested the news, the gains in stock prices faded, and all major indices posted losses, a now familiar outcome in a month known for rocky trading.
"It's natural for the market to pause, and consolidate. And I think that's really what it's doing more than anything now," Karl Haeling of LBBW Bank told AFP.
But "whether it lasts, you know, two more days or two more weeks, or how far it goes, I have no idea."
Meanwhile Apple shares slipped one percent after the tech giant unveiled its iPhone 13 and newest watch.
Both London and Paris ended the day lower in European trading, while Frankfurt edged higher.
In Asian trading, Hong Kong and Shanghai fell on concerns about troubled property titan Evergrande, which is teetering on the brink of bankruptcy and owing hundreds of billions of dollars.
The firm has warned it is under "tremendous pressure" amid a cash crunch that many fear could send it under and have a severe impact on the Chinese economy.
Evergrande's Hong Kong-listed shares fell nearly 12 percent and have lost around 80 percent since the start of the year.
But Tokyo clocked up its highest finish in 31 years on hopes for fresh Japanese stimulus.
Oil prices have bounced back strongly, and inched up despite the International Energy Agency saying global crude demand had dropped for three straight months as Covid cases rise in Asia.
But it added that oil demand was expected to rebound in October.
New York - Dow: DOWN 0.8 percent at 34,577.57 (close)
New York - S&P 500: DOWN 0.6 percent at 4,443.05 (close)
New York - Nasdaq: DOWN 0.5 percent at 15,037.75 (close)
London - FTSE 100: DOWN 0.5 percent at 7,034.06 (close)
Frankfurt - DAX 30: UP 0.1 percent at 15,722.99 (close)
Paris - CAC 40: DOWN 0.4 percent at 6,652.97 (close)
EURO STOXX 50: UP 0.1 percent at 4,191.67 (close)
Tokyo - Nikkei 225: UP 0.7 percent at 30,670.10 (close)
Hong Kong - Hang Seng Index: DOWN 1.2 percent at 25,502.23 (close)
Shanghai - Composite: DOWN 1.4 percent at 3,662.60 (close)
Euro/dollar: DOWN at $1.1802 from $1.1815 at 2040 GMT
Pound/dollar: DOWN at $1.3806 from $1.3839
Euro/pound: UP at 85.45 pence from 85.34 pence
Dollar/yen: DOWN at 109.66 yen from 110.01 yen
Brent North Sea crude: UP 0.5 percent at $73.89 per barrel
West Texas Intermediate: UP 0.5 percent at $70.77 per barrel
Copyright AFP. All rights reserved.