Losses on stock markets have continued after the collapse of fourth largest US investment bank, Lehman Brothers, which has filed for bankruptcy protection.
 The global financial community is reeling from Lehman's demis |
European markets opened sharply lower for a second day, with the UK's FTSE 100 and Germany's Dax both down 1.7%.
Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.
Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.
Banks hit
The FTSE 100 of leading UK shares fell 91 points to 5,113 in morning trade. The Dax index of leading German shares was down 106 points at 5,959 points and France's Cac 40 was down 65 points at 4,104 points.
The US stock market on Monday had its worst day's trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51.
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Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.
Chinese share prices closed 4.47% lower as the fallout from Lehman Brothers outweighed Beijing's first interest rate cut in years, announced on Monday.
The benchmark Shanghai Composite Index, which covers both A and B shares, was down 93.04 points at 1,986.64 after touching a low of 1,974.39.
Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.
Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%.
Barclays Bank - which today said it was in talks to take on some of Lehman's US operations - was one of the big fallers, down more than 5%.
In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%.
'Crisis'
Central banks in Asia attempted to calm markets after similar steps on Monday by their US and European counterparts.
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The Bank of Japan injected 2.5 trillion yen ($24bn; £13bn) into the banking system. Australia and India also pumped cash into their money markets.
The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, threatens to deal further blows to other financial institutions, as they unwind deals with the former investment giant.
"We're in the middle of a crisis," said YK Chan at Phillip Asset Management in Hong Kong.
Meanwhile, there were fears AIG, once the world's largest insurers, could also face collapse.
The State of New York has announced a "multi-billion dollar financing plan" to stabilise the insurer's finances.
Central banks in Europe and the US have also moved to reassure markets.
The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn into the financial system.
'Rough spots' ahead
US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses".
Henry Paulson was upbeat despite the turmoil
He said Americans could remain confident in the "soundness and resilience" of the US financial system.
But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.
Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".
But he gave no details of what such steps might mean.
On Monday President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."
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