The FTSEurofirst 300 index of top European shares fell 4.93 per cent to close at 829.73 points, its lowest close since May 2003.
The index lost eight per cent over the week, and has lost 22 per cent in October.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 fell between 3.54 and five per cent.
Both of Russia's main stock markets dived more than 13 per cent, prompting the government to suspend trading on them until Tuesday, the exchanges said.
John Terrett, Al Jazeera's correspondent at the New York stock exchange, said that prior to the opening of markets in the US there had been so much selling pressure in futures, where investors speculate on the market's opening figures, that the exchange had been unable to register any fresh data.
Terrett said: "This is already turning into an historic day after huge stock market dips in Asia and Europe. We are witnessing a wholesale flight out of stocks and into safer treasuries."
Thomas di Galoma, head of government bond trading at Jefferies & Co in New York, said: "I would characterise this as a shell-shocked mentality out there. It's all the deleveraging of equities... It's causing an issue for everyone."
Earlier in Asia, Japan's benchmark Nikkei index fell by 9.6 per cent, closing below the key 8,000-point level after Sony cut its full-year profit forecast by 57 per cent.
The leading electronics company blamed a strengthening yen and lower demand for its flat-screen televisions and digital cameras.
The downward revision sent Sony shares diving by 12 per cent and caused investors to sell shares of other exporters as well.
In South Korea, stocks closed 10.6 per cent lower after the central bank reported that the country's economy grew at its slowest pace in four years, as exports, manufacturing and services were all weakened.
In the UK, the office for national statistics confirmed that Britain is on the brink of recession.
The office said output fell by 0.5 per cent, a bigger-than-expected drop, knocking shares and weakening the pound.
|The office for national statistics confirmed that Britain is on the verge of recession [AP]
Alan Fisher, Al Jazeera's correspondent at the London stock exchange, said: "It's a bad news day all round.
"Even though many started down around five or six per cent and had a slight recovery, they're all down now. A lot of the FTSE's drop will have been fuelled by recessionary figures that have come out.
"The GDP, which is essentially the sum of all the income-generating parts of the economy, has gone into negative growth.
"If it happens again in the next quarter, and that seems likely, then Britain will officially be in recession."
Charles Bean, deputy governor of the Bank of England, said Britain's economy was still in the early days of weakness.
Speaking to the Scarborough Evening News, a Britsh newspaper, he said: "This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history."
The economic turmoil has also affected Latin America, where market closing numbers reflected deeper losses than on Wall Street.
Mexico's Bolsa traded down over four and half per cent on Friday, shedding over 800 points.
Inflation in Mexico, rising faster than forecast, is driving up the costs of fruit and vegetables. Prices for public transportation are also on the rise across the country, hitting hardest the poor who rely on the services.
In Brazil, the benchmark BOVESPA index finished the day almost seven per cent down.
The Brazilian Real has been devalued about 30 per cent in recent weeks. Brazil's central bank announced it will put about $10m into the financial market to try to preserve the currency and stop the slide.
Argentina's MERVAL index tumbled over seven and half per cent on Friday.
Al Jazeera's Lucia Newman, reporting from Buenos Aires, said: "President Cristina Kirchner's decision to nationalise the country's pension funds has sent prices plummeting by more than 20 per cent over the last three days on Argentina's stock exchange."
She said what's being called the "Tango Effect" has also reverberated across the Atlantic, causing stock prices to plummet in Spain.
"Spanish investors have invested billions of dollars in this country. And the fear, rightly or wrongly, is that this nationalisation could be the first of many that could effect Spanish companies," she said.