Fears over another recession and legal action against major U.S. banks drove investors out of stocks, as they awaited key U.S. data on jobs.
U.S. stock futures were down 0.8 per cent, or 87 points, at 11,378, while S&P 500 futures slid 0.9 per cent, or 10.8 points, to 1,190.05 about two hours before Wall St. opened for business.
Britain's FTSE 100 slipped 1.9 per cent, France CAC 40 sank 2.6 per cent and Germany's DAX slumped 2.8 per cent.
The U.S. August employment report, due at 8:30 a.m. (ET), is expected to show an increase of 75,000 jobs, down from 117,000 in July. Many market-watchers said they expected stocks to slide if the jobs figure came in lower than the consensus forecast.
Large U.S. banks, such Bank of America and JP Morgan Chase, are likely to face federal government lawsuits over mortgage securities sold before the U.S. real estate market crashed, according to reports in the Financial Times, the Wall Street Journal and the New York Times.
Confirmation that Greece will miss its 2011 deficit target of 7.6 percent and uncertainty over Italy's commitment to austerity measures underscored unease about the euro zone, prompting investors to shy away from riskier assets.
Gold rose 1.4 per cent to $1,854.70 an ounce.
Bund futures rose 69 ticks, supported by weak demand at this week's Italian and Spanish debt sales and dismal manufacturing figures on Thursday.
The U.S. dollar rose 0.1 per cent against a basket of major currencies. It traded at $1.0228 against the Canadian dollar.
U.S. crude was 98 cents lower at $87.95 a barrel.
Benchmark copper on the London Metal Exchange fell 0.8 per cent to $9,075.25 a tonne.