Dow Jones closed 4.6% lower
Japan's economy grew less than expected at the end of last year, highlighting potential weaknesses in Prime Minister Abe's economic policies.
UK shares had a shaky start to the week as negotiations over the US debt ceiling continue to drag on.
The Federal Reserve last night indicated it has no plans to tone down its quantitative easing programme in the near future, arguing the US economy is not in a strong enough position to turn off the liquidity taps.
Global markets soared on Wednesday after the US Federal Reserve inadvertently released minutes from its latest policy meeting five hours earlier than planned.
(Updated 11:15am) The FTSE 100 is trading more than 1% higher in mid-morning trading on Tuesday afte closing 2011 down 5.5% for the year.
Markets moved lower on Monday as fears over Greece and Italy remained despite the imminent formation of a Greek coalition government.
The Dow Jones and S&P 500 surged yesterday as market sentiment was lifted by US growth almost doubling in Q3.
News that Greece will fail to meet deficit reduction targets pushed the FTSE 100 down 2.8% at open, dragging it below 5,000 points.
Stocks in the US and Asia rallied overnight after Italy turned to China for help with its debt crisis.