The FTSE-100 index in London dropped 1 percent to 6,523, while Germany's DAX index fell 0.7 percent to 7,828.69 and France's CAC-40 index declined 0.6 percent to 5,699.01.

Markets in Asia were sharply lower, however, as Hong Kong's benchmark index plunged over 3 percent and markets in Japan, China, South Korea and Singapore fell more than 2 percent.

Repeating a pattern seen several times this year, a sharp selloff in U.S. stocks prompted investors to dump shares. The Dow Jones industrial average tumbled more than 360 points Thursday as investors reacted nervously to surging oil prices and a smaller-than-expected gain in U.S. consumer spending for September.

A warning about inflation Wednesday from the U.S. Federal Reserve when it cut rates also triggered concern that the U.S. central bank might hold off on further rate cuts or even consider raising them if inflation accelerates. That is renewing worries about a slowdown in the U.S. economy — a vital market for exporters.

"I'm not expecting a serious selloff, but I think Asian markets are responding to a genuine change in the overall outlook — that the Fed is not going to be as aggressive in cutting rates," said Tim Rocks, Asia Strategist at Macquarie Bank in Hong Kong.

"But you'll certainly see a slower pace in gains," Rocks said. "The Fed's attitude is going to put a lid on markets."

Japan's benchmark Nikkei 225 index tumbled 352.92 points, or 2.1 percent, to finish at 16,517.48, dragged down by financial shares. Mitsubishi UFJ Financial Group dropped 6 percent following a recent revision of its profit outlook on weak domestic lending, while Mizuho Financial Group fell 5.7 percent.

Banking shares in London followed the trend, with Barclays dropping 5.7 percent and Royal Bank of Scotland off 4.5 percent. HSBC fell 2 percent.

U.S. stock futures edged lower as investors awaited the Labor Department's October jobs report for more clues about the state of the U.S. economy. Jitters over the fallout from the subprime mortgage crisis — which roiled markets in August — will linger for a while, traders said.

In Hong Kong, the blue chip Hang Seng Index sank 3.25 percent to close at 30,468.34. The index is still up 52.6 percent this year.

The stunning ascent this year in many Asian markets has been punctuated by occasional drops, usually sparked by plunges on Wall Street, which seem to be taken as cues by investors to unload shares that may have risen too high, too quickly. So far this year, each time Asian markets have dropped sharply, nearly all have quickly bounced back and climbed higher.