Traders fled for the exits for a second day after the new US leader signed an executive order Friday banning entry to travellers from seven Muslim-majority countries and imposing a temporary ban on refugees.
While the White House defended the move as aimed at fighting terrorism, world leaders and protesters around the world condemned it as a war against Muslims.
The overwhelming outrage spooked investors, who fear the announcement could be a sign the tycoon will press ahead with many of his protectionist promises, overshadowing economy-boosting measures such as infrastructure spending and tax cuts -- which had fuelled a rally in November and December.
All three main Wall Street indexes ended lower, while London, Paris and Frankfurt each lost more than one percent.
The sell-off continued into Asia, with Tokyo ending 1.7 percent lower. Dealers were unimpressed by the Bank of Japan's decision to raise its economic growth forecasts through 2019 but delay any fresh monetary-easing measures.
Sydney shed 0.7 percent and Seoul sank 0.8 percent. Singapore, Wellington, Manila and Kuala Lumpur were also sharply lower.
Hong Kong and Shanghai were closed for holidays.
The dollar also lost ground against most of its major peers, with the yen getting extra support from the BoJ's lack of action on monetary easing.
Higher-yielding currencies such as the South Korean won, Australian dollar and Indonesian rupiah were also stronger.
"The fulcrum for the fear and selling in stocks and the US dollar... was the public's visceral response to the president's immigration and travel ban," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, in a note.
