Global equity markets fell sharply on Friday as slumping oil prices raised concerns about slower growth, while the dollar slipped against the yen on views the Bank of Japan may not ease policy as much as expected.

Trading in crude oil and the bond market was volatile, while stock investors were skittish in the wake of the euphoria that followed the US Federal Reserve's first interest rate hike in almost a decade on Wednesday.

Wall Street accelerated its slide into the close, with the Dow closing more than 2 per cent lower and the broad market S&P 500 down almost as much. All S&P sectors declined, led by a 2.51 per cent fall in financial stocks, and the S&P 500 notched its biggest two-day per centage loss since Sept. 1.

The sell-off appeared tied to lower oil prices and the Fed's move, and not options expiration, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

"The market is more sensitive to oil than anything else," he said.

MSCI's all-country world stock index fell 1.28 per cent, while the FTSEurofirst 300 index of leading European shares closed down 1.05 per cent at 1,419.35.

The Dow Jones industrial average lost 367.39 points, or 2.1 per cent, to 17,128.45. The S&P 500 fell 36.37 points, or 1.78 per cent, to 2,005.52 and the Nasdaq Composite shed 79.47 points, or 1.59 per cent, to 4,923.08.

The yen gained after the BoJ merely tweaked its monthly asset-purchase program. The move halted the dollar's ascent, fueled in recent months by views that the Fed's likely decision to raise rates and the BoJ's path of more potential stimulus would drive investment into higher-yielding US assets.

"The BoJ's move shows a weak hand," said Jens Nordvig, global head of FX strategy at Nomura in New York. "It suggests the BoJ is out of ammunition, and will not be able to deliver anything meaningful going forward," he said.

The dollar, which had hit a more than two-week high of 123.590 yen, fell 1.05 per cent to 121.26.

The euro rose 0.36 per cent against the dollar at $1.0864 . The dollar index, which measures the greenback against a basket of six other major currencies, fell 0.57 per cent to 98.704.

Equities suffered from fatigue after markets rose in anticipation of the Fed move, while the slumping price of oil drove investor sentiment on concerns over global growth and a growing supply surplus.

"We had a couple of strong days as a result of the Fed," said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut.

"The market is getting sucked into a fear trade," he said. "It's really oil - is it a glut or a global slowdown? But I don't think it's symbolizing a slowdown in the global economy."

Crude oil resumed its retreat following a rebound of almost 1 per cent after the US benchmark traded well below $35 a barrel.

The reverse in prices came on news the US oil rig count rose for the first time in five weeks. Seventeen rigs were added in the week ended Friday despite continued weak crude prices, which suggests no end in sight to the supply glut.

Global benchmark Brent crude fell 18 cents to settle at $36.88 a barrel, while US crude futures settled down 22 cents at $34.73 a barrel, the second straight day in almost seven years it closed below $35.

Prices on US Treasuries rose in choppy trading on rising investor skepticism over the Fed's ability to raise interest rates as much as it would like next year.

The decline in crude and tumbling stock markets encouraged investors to seek the relative safety of US government debt. The slide in oil prices suggests inflation will remain benign.

The benchmark 10-year US Treasury note rose 10/32 in price to yield 2.2005 per cent. – Reuters