The US Dow Jones index ended 2.7% down, after a dismal showing in Europe, where Frankfurt’s Dax fell 4% and the FTSE 100 2.4%.
This was despite President Barack Obama’s new $450bn (£282bn) jobs plan.
The resignation of the European Central Bank chief economist also rattled investors.
Reports suggest that Juergen Stark’s departure was over disagreements about the central bank purchasing the debt of struggling eurozone economies.
The ECB has recently been buying up the debt of Spain and Italy – something historically opposed by many of the German policymakers as it may increase the potential risk on the ECB’s own balance sheet.
Some argue that bond buying also discourages governments from taking action on their deficits.
Analysts suggested his departure could indicate a potentially damaging split at the central bank at a crucial time for the global economy.
“Evidently there are more and more ECB council members against the controversial purchase of bonds,” said Marco Bagel, an analyst at Postbank.
“It suggests there is really a big row in the governing council and this is quite a severe step. It shows how divided the ECB is on this very crucial question,” said Juergen Michels of Citigroup.
The share falls come at the end of another week of volatility in the stock markets, with shares swinging wildly between gains and losses on a daily basis.
Bank stocks were among the major decliners on Friday as investors continue to worry about their exposure to bad debt.
The rate that banks lend to each other – a measure of the confidence they have in each other’s balance sheets – is at the highest it has been since July 2009.
In the UK, Barclays dropped 9.4% and Royal Bank of Scotland declined by 5.4%
Deutsche Bank fell 7%. France’s Societe Generale fell 10.6% lower and Credit Agricole dropped 7.8%.
And the euro fell 1.6% against the US dollar, to $1.3664, down to a six-month low.
The G7 group of leading economies met in Marseille to consider a “coordinated response” to the faltering global economy, but did not produce any communique to let markets know what if anything had been agreed.
Earlier, International Monetary Fund chief Christine Lagarde urged “bold action” on the global economy.
“The key message I wish to convey today is that countries must act now – and act boldly – to steer their economies through this dangerous new phase of the recovery,” Ms Lagarde said.
The two-day meeting comes as the Organisation for Economic Co-operation and Development suggested it was possible that many major economies could go back into recession this year.
The OECD predicts the G7 economies will grow by just 0.2% in the last three months of the year.