US stocks ended the day lower after Treasury Secretary Steven Mnuchin expressed doubts about securing a stimulus deal ahead of next month's presidential election.
The S&P 500 fell 0.7 percent, wiping out previous gains, while the tech-heavy Nasdaq Composite fell 0.8 percent. Amazon and Netflix fell more than 2 percent, while Facebook and Adobe fell more than 1 percent.
Mr Mnuchin said that despite progress in talks with Democrats, the two sides remained "far apart" on certain points in an agreement. His comments came during a conference held by the Milken Institute on Wednesday. The prospects of reaching a deal before the November election have slowly deteriorated over the past few weeks despite ongoing negotiations between Mr Mnuchin and Nancy Pelosi, Democratic Speaker of the House of Representatives.
"We are still making progress on certain issues," said Mnuchin. "We are still far apart on certain issues."
Bank stocks fell despite encouraging signs from the third quarter result. The KBW bank index fell nearly 2 percent, dragged down by Bank of America, which lost more than 5 percent, and Wells Fargo, which fell 6 percent.
The decline for the S&P 500 was due to the large-cap index gaining nearly 4 percent last week, as polls predicted a decisive November election victory for Joe Biden, Democratic challenger to President Donald Trump. A victory for the former vice president increases the prospect of further fiscal stimulus.
The stocks were also hit by news that pharmaceutical companies Johnson & Johnson and Eli Lilly were halting trials of an experimental Covid-19 vaccine and therapy, respectively, for safety reasons.
The regional Europa Stoxx 600 ended the day flat and the UK blue chips FTSE 100 benchmark fell 0.6 percent.
The pound sterling has been chopped off and widely traded ahead of a summit where EU leaders will discuss their future trade relations with the UK.
The pound fell 0.5 percent against the dollar to $ 1.2869. It then reversed course, rising 0.7 percent to $ 1.3027 after a Bloomberg report indicated that the UK would stay on talks after the October 15 deadline.
Against the euro, the pound sterling rose 0.7 percent to 1.1086 euros, after falling 0.3 percent on the day to 1.0981 euros.
At the EU summit, which begins Thursday, European leaders are expected to forge their own negotiating plan with Britain as the deadline for Britain's exit from the single market and the bloc's customs union is December 31.
"The more time goes by, the more likely it is that no deal will be reached," said Peter Westaway, Vanguard's chief economist for Europe.
But he added that the difference between no deal and a basic trade deal that meant no tariffs or quotas but kept supply chain disruptions was "small".
Ian Tew, a sterling trader at Barclays, said that while the pound is very sensitive to signs of Brexit sentiment, "the market is reacting and recognizing the risk of a no-deal".
"The recent rhetoric and no-deal phrase are being voiced quite a lot," he added, expressing concerns that "these conversations are adding to further negativity."
In the debt markets, traders continued to grab bonds from economically weaker eurozone countries in the expectation that the European Central Bank would expand its system of buying securities to bolster financial stability through the pandemic.
The yield on 10-year Italian bonds, which is moving in reverse to prices, was a record low of 0.655 percent. Greece's 10-year bonds followed the same pattern, returning 0.757 percent.
Italy first issued bonds on Tuesday that do not pay interest to buyers. With consumer prices falling in the euro zone and rising coronavirus cases, investors are counting on the ECB to increase the size of its pandemic emergency purchase program from currently EUR 1.35 billion in the coming months.