European stock exchanges dropped heavily in morning trade, dragged down by mining and metals stocks and extending last week's plunge caused by concern about higher inflation.
The falls came as the New York Stock Exchange (NYSE) announced it had offered to buy the pan-European Euronext exchange to create a group with a value of 16 billion euros (21 billion dollars).
The merger of the two groups would create the world's leading stock market, at nearly three times the size of its nearest rival.
In Monday trade, London's FTSE 100 index of leading shares tumbled 1.65 percent to 5,564.20 points, Frankfurt's DAX 30 shed 1.44 percent to 5,590.82 points and in Paris the CAC 40 index lost 1.32 percent to 4,879.33.
The DJ Euro Stoxx 50 index of leading eurozone shares declined 1.43 percent to 3,573.29 points.
The euro stood at 1.2764 dollars.
Global share prices fell strongly last week on investor concerns over rising inflation, uncertainty over interest rates and a weak US dollar.
Prior to the current turbulence, European stock exchanges had traded close to recent five-year peaks against a backdrop of positive economic data, company results and merger and acquisition news.
The FTSE sank 4.3 percent or 254.7 points last week.
Hilary Cook, director of investment strategy at Barclays Stockbrokers, said that lower commodity prices were driving the FTSE falls on Monday because the proportion of shares tied up in the sector made the FTSE a "quasi-commodities index".
She said: "Everyone assumed it was going to bounce back but unfortunately commodity prices are in free-fall. The market is in an 'all news is bad news' kind of mood."
Wall Street had posted modest gains Friday as investors scooped up beaten-down shares following a brutal series of declines in recent days.
But Asian share prices fell sharply Monday, with Tokyo's benchmark Nikkei index ending below 16,000 points for the first time in more than two months on concerns that steeper US inflation will translate into higher American borrowing costs, dealers said.
In London, mining stock prices dived amid falling metals prices. Antofagasta plunged 8.34 percent to 1,869 pence, Kazakhmys tumbled 7.98 percent to 963 pence and Xstrata shed 6.99 percent to 1,797 pence.
In Paris, steel group Arcelor gave up 7.46 percent to 32.24 euros, a day after its board postponed its response to an improved takover bid from its rival Mittal Steel.
Mittal Steel had said Friday that it raised its hostile takeover bid for Arcelor to 25.8 billion euros (32.94 billion dollars) from 18.6 billion euros.
Not all European stocks struggled on Monday, however. In London, the Alliance and Leicester bank saw its share price soar 6.46 percent to 1,187 pence after Credit Agricole, France's biggest bank, confirmed an interest in possibly bidding for its British peer.
Credit Agricole, which fell 1.33 percent to 29.64 euros on the news, was responding to a weekend press report that said it is poised to offer six billion pounds (8.8 billion euros, 11.3 billion dollars) for A and L.
Elsewhere in Paris, Euronext fell 2.08 percent to 73.05 euros, with investors deeming the bid by the NYSE to be below the market price.
On Friday, the Dow Jones Industrial Average rose 0.11 percent to close at 11,139.99 points and the tech-heavy Nasdaq composite advanced 0.62 percent to 2,193.88 points. The broad-market Standard and Poor's 500 index gained 0.41 percent to 1,267.03.
The US rebound came after steep declines earlier last week, including the worst session for the Dow blue-chip index in over three years on Wednesday.
In Asia on Monday, Tokyo's benchmark Nikkei-225 index fell 1.84 percent to 15,857.87, the lowest closing level since March 8.
Hong Kong's key Hang Seng index plunged 3.11 percent to 15,805.52 points, as jitters over sharp falls in the region prompted investors to step up selling in the afternoon session, dealers said.