Europe's main stock markets slid on Thursday following news that the 17-nation eurozone economy fell into recession in the third quarter as a result of the region's sovereign debt crisis, dealers said.
Investor sentiment was also dented by concern over the looming "fiscal cliff" in the United States, and lingering fears over a potential Greek default that could send fresh shockwaves through financial markets.
In late morning deals, Frankfurt's benchmark DAX 30 index of top companies dropped 0.54 percent to 7,064.06 points and in Paris the CAC 40 lost 0.29 percent to 3,390.
London's FTSE 100 index shed 0.32 percent to 5,703.78 points, hit also by worse-than-expected British retail sales.
The European single currency rose to $1.2754 from $1.2734 late in New York on Wednesday. Gold prices eased to $1,723.49 an ounce from $1,725.75 on the London Bullion Market.
The eurozone tipped into recession in the third quarter or three months to September, with the economy shrinking 0.1 percent compared with the second quarter when it contracted 0.2 percent, official data showed on Thursday.
"The GDP figures did not tell us anything we didn't already know; however they did confirm that things are as bad as we thought," said analyst Craig Erlam at trading group Alpari.
Recession, defined as two consecutive quarters of decline, comes as unemployment is soaring to record highs in Spain and Italy.
"Much of the news of slowing growth in the eurozone is priced in, and a 0.1-percent drop is not as bad as some of the most bearish of forecasts by economists who were looking for 0.4-0.6 percent contraction," said Ishaq Siddiqi, analyst at ETX Capital trading group..
Separate data showed that the economy of eurozone engine Germany grew by just 0.2 percent in the third quarter, in line with expectations.
"The impact (of the GDP data) has been mild with the real worry about slowing growth in the core and fears that the debt crisis is now gnawing at the engines of the eurozone's growth," added Siddiqi.
"But the euro is holding its own against the dollar, and stock markets appear to be busy with assessing the implications of no solution to the US fiscal cliff issue and the remote possibilities of a Greek default."
On the corporate front, shares in BP were down 0.42 percent at 423.95 pence as the British energy giant said it was in "advanced" talks with US authorities to settle criminal charges and claims arising from the devastating 2010 Gulf of Mexico oil spill disaster.
The company's reputation was ravaged two and a half years ago after an explosion on the BP-leased Deepwater Horizon rig killed 11 workers and sent millions of barrels of oil spewing into the sea.
European equities had fallen on Wednesday as workers across many indebted eurozone nations -- particularly Greece, Italy, Portgual and Spain -- took part in coordinated general strikes in protest at their governments' deep austerity programmes.
Wall Street stocks tumbled overnight as President Barack Obama challenged Republicans to accept tax increases for the wealthy in a deal to avert the year-end fiscal cliff.
New York shares closed at their lowest level in more than four months after Obama drew a hard line against Republicans in the battle for a compromise to avoid automatic spending cuts and tax increases that take effect in January.
The Dow Jones Industrial Average closed at 12,570.95 points, its lowest close since June 26.
Asian stock markets mostly fell on Thursday in volatile trade, but Tokyo was lifted by the weak yen and after Japanese Prime Minister Yoshihiko Noda called a national poll for December 16.
Hong Kong shares fell 1.55 percent, Sydney shed 0.89 percent and Seoul slumped 1.23 percent, but Tokyo soared 1.90 percent.
China meanwhile unveiled its leaders for the next 10 years, with investors hoping for some clarity on future policy in the world's number two economy.
However, Shanghai shares fell 1.22 percent as dealers bet that the nation's new leadership would not immediately embark on economy-boosting measures.
China's all-powerful Communist Party on Thursday unveiled a new seven-man leadership council steered by Xi Jinping to take command of the world's number two economy for the next decade.