World stocks, commodity prices and the euro tumbled on Tuesday as risk appetite ebbed over concerns about the repayment of 442 billion euros ($545.5 billion) to the European Central Bank.
Gold inched higher and U.S. Treasuries rose, pushing two-year note yields to the lowest on record, as jitters over the euro zone debt crisis supported safe-haven demand.
Yields on the benchmark U.S. 10-year Treasuries fell below 3 percent for the first time since April 2009 as the euro hit an all-time low versus the Swiss franc and an 8-1/2-year trough against the yen.
Investors shunned riskier assets and traders cited significant U.S. dollar short covering overnight, further weighing on the euro.
The dollar was up against a basket of major currencies, with the U.S. Dollar Index .DXY up 0.71 percent at 86.26.
The euro was down 0.98 percent at $1.2157.
The risk premium on southern European government bonds over benchmark German bunds widened and the cost of insuring their debt against default rose.
There is quite a lot of worries about the (U.S.) payrolls, worries about stress tests of European banks and also the rollover of ECB's long-term repo operations that will be taking place in the next couple of days, said Paul Robson, currency strategist at RBS Global Banking.
European shares slumped, with the FTSEurofirst 300 .FTEU3 index down 2.8 percent. Shanghai's equities index .SSEC plunged more than 4 percent and Japan's Nikkei .N225 was poised for its worst quarter since 2008.
Banks were among the heaviest decliners as they prepare to pay back the ECB money that was borrowed a year ago at rock bottom rates, leaving a potential liquidity shortfall in the financial system of over 100 billion euros.
Barclays, BNP Paribas and BBVA were down 3 percent to 4.1 percent.
U.S. stocks extended losses, dropping more than 2 per cent, after a weak reading of the Conference Board's U.S. consumer confidence index, which fell in June to 52.9 from a downwardly revised 62.7 the previous month.
The CBOE Volatility Index .VIX jumped more than 16 percent to a session high of 33.82 on news of the private business research group's confidence index.
Even though single-family home prices unexpectedly climbed in April from the previous month, signs of a sustained recovery have yet to emerge, price indexes from Standard & Poor's/Case Shiller showed.
The S&P composite index of prices in 20 U.S. metropolitan areas rose 0.4 percent on a seasonally adjusted basis after a downwardly revised 0.2 percent drop in March, compared with a 0.1 percent decline forecast in a Reuters survey.
MSCI's all-country world index .MIWD00000PUS fell 2.7 percent and its emerging markets index .MSCIEF fell. 2.8 percent.
Shortly after 10 a.m., the Dow Jones industrial average .DJI was down 224.46 points, or 2.21 percent, at 9,914.06. The Standard & Poor's 500 Index .SPX was down 25.39 points, or 2.36 percent, at 1,049.18. The Nasdaq Composite Index .IXIC was down 65.29 points, or 2.94 percent, at 2,155.36.
Oil prices fell more than 3 percent to below $76 per barrel and copper shed more than 4 percent as concerns about economic recovery weighed on market sentiment.
U.S. light sweet crude oil fell $2.64 to $75.61 a barrel.
ICE Brent fell $2.47 to $75.12.
Benchmark 10-year U.S. Treasury notes were trading 14/32 higher in price to yield 2.97 percent. Bond yields move in inverse relationship to their price.
Against the yen, the dollar was down 0.92 percent at 88.53.
(Additional reporting by Angela Moon, Chris Reese in New York; Harpreet Bhal, Jan Harvey; Writing by Herbert Lash. Editing by W Simon ( )