The concern is the outlook for inflation, which in small doses is crucial to a healthy economy and which monetary-policy makers around the world have failed to accelerate.
Another sharp fall in oil prices and weak consumer-price data in the U.S. on Wednesday gave traders fresh reasons to doubt what already were dismal expectations for the year.
The Dow Jones Industrial Average fell by more than 500 points before rebounding to close down 249 points, or 1.6%, extending a rout that has left the blue-chip index off 9.5% this year.
Japan’s Nikkei Stock Average and the U.K.’s FTSE 100 index sank into bear markets—down 20% from a recent high.
“I think the selloff did bring in some bargain hunters at the end of the day,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Corp., which oversees $946 billion.
“That is somewhat a reflection that the worries in the market were predominately based overseas. If you look at the way the market traded, it didn’t scream fear.”
Investors returning to financial markets after the New Year holiday were greeted with a worldwide selloff sparked by the weak factory data in China, while a report showing the fastest contraction in U.S. manufacturing in six years added to anxiety that slowing growth in Asia’s largest economy may be spreading.
A flareup in tensions between Saudi Arabia and Iran increased geopolitical unease, initially igniting gains in crude oil.
"When sentiment rules, data can only play a secondary role," said Michael McCarthy, chief strategist at CMC Markets in Sydney.
"The lift in China exports in December not only smashed bearish expectations of a fall but spoke directly to the idea that the economy in China tanked" in the last quarter of 2015.
"Yet these facts barely dented global investor psyches."
The Wall Street jitters sent Japanese shares lower, including giant exporters such as automakers Toyota and Honda, as well as Bridgestone and trading companies.
The yen has been sought as a safe haven in the absence of confidence in other currencies recently, and that's usually a negative for Japanese companies, which rely on exports to boost earnings.
The dollar has dropped from about 121.50 yen in mid-December to about 118 yen lately.