Oil prices fell nearly 5 per cent, the dollar rallied and an index of emerging market currencies fell by the most in six months. The MSCI world equity index, which tracks shares in 49 countries, touched its lowest since August 3rd.
Britain is considering a second national lockdown as new cases rise by at least 6,000 per day while Denmark, Greece and Spain have introduced new restrictions on activity.
Germany's health minister said rising new infections in countries like France, Austria and the Netherlands are worrying.
Adding to the market's nervousness, the U.S. presidential campaign was upended late Friday after U.S. Supreme Court Justice and liberal icon Ruth Bader Ginsburg died. President Donald Trump said he would announce his candidate to replace her, which needs Senate confirmation, by the end of this week.
Ginsburg's death also decreases the chances of Congress passing another stimulus package to help lift the domestic economy. "It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election," said Ed Campbell, portfolio manager and managing director at QMA in Newark, New Jersey.
"There is also just general election related jitters ... and possibly that we have a contested or delayed outcome."
The U.S. will hold presidential elections on November 3rd.
The Dow Jones Industrial Average fell 844.55 points, or 3.05 per cent, to 26,812.87, the S&P 500 lost 82.23 points, or 2.48 per cent, to 3,237.24 and the Nasdaq Composite dropped 176.17 points, or 1.63 per cent, to 10,617.12.
The pan-European STOXX 600 index lost 3.24 per cent and MSCI's gauge of stocks across the globe shed 2.44 per cent.
Emerging market stocks lost 1.82 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.48 per cent lower.
Japan has public holidays on Monday and Tuesday this week, meaning volumes are expected to be thin in Asian trading.
Markets were also hit by a media report on how several global banks moved large sums of allegedly illicit funds over nearly two decades.
The S&P banking subindex fell 4.6 per cent.
Concerns rising
The dollar rose on Monday after two weeks of declines as investors sought safer currencies.
"An unrelenting rise in coronavirus cases globally is weighing on sentiment at the start of the trading week as investors increasingly question their rosy predictions about the recovery," said Raffi Boyadjian, senior investment analyst at online broker XM.
The dollar index rose 0.762 per cent with the euro down 0.69 pet cent to $1.1755.
The Japanese yen weakened 0.25 per cent versus the greenback at 104.84 per dollar, while Sterling was last trading at $1.2791, down 0.96 per cent on the day. Reuters
