HONG KONG, China (CNN) -- Hong Kong's Hang Seng index fell 8 percent in early afternoon trading Tuesday as global markets tumbled on fears that a U.S. economic slowdown will lead to a global recession.
Japan's Nikkei index plunged below 13,000 for the first time in more than two years, down 4.5% in afternoon trading.
South Korea's Korea Composite Stock Price Index fell 90.03 points, or 5.4 percent, to 1,592.63.
Australia's benchmark S&P index was down 6 percent.
The Singapore stock exchange was down 4.5 percent, and Taiwan's benchmark Taiex was down 6.6%.
Trading was halted in Indian markets Tuesday as shares plunged on opening, with the benchmark index falling 9.5 percent. Shares in India's Sensex fell nearly 11 percent -- a four-month low -- on Monday.
Europe's main three indices, the FT-100 in London, the CAC 40 in Paris and the DAX in Frankfurt fell between 5 and 7 percent on Monday.
"I think a lot of people had been hoping that when the new year started that we would find that the U.S. housing market's problems were largely isolated to that market," said Royal Bank of Scotland's Kit Jukes. "Every piece of news we've had since Christmas has argued against that position."
Traders said steps announced last week by President Bush to kick-start the U.S. economy are too little too late. They got no direction from New York, because U.S. markets were closed for the Martin Luther King Jr. holiday.
Traders now want to see how Wall Street reacts when it reopens Tuesday.
"I think the expectation is the U.S. will open further down tomorrow," said analyst Howard Wheeldon of BGC Partners. "That is a big kick in the teeth for President George W. Bush."
Markets also dove across South America, where the United States is the largest trading partner for many economies. Brazil's Bovespa exchange, the continent's largest, closed down 6.6 percent, Argentina's Merval dropped 6.3 percent, Colombia's IGBC was down 7.7 percent and Peru's General Index was off 8.4 percent.
In North America, the Toronto stock exchange fell 4.75 percent, while Mexico City closed down 5.35 percent.
If the United States slips into recession, Americans may buy fewer goods, especially those from overseas. That's why shares from Toyota in Tokyo to BMW in Frankfurt were down heavily.
Banks also fell hard as the lending policy during the boom time continues to concern analysts. Banks and insurance companies also own a lot of equities.
Commodity-led shares, like oil firms and mining companies, were also hit hard, after flying high for most of 2007. If the world economy falters consumers are likely to less oil and buy fewer products like gold and copper.
By only the 14th trading day of 2008, shares in Europe's main markets are now down between 12 to 15 percent on the year.
During the market gyrations of 2007, sharp falls were often followed by sharp rises. There is no evidence of that yet in 2008. E-mail to a friend
CNNenEspanol's Gabriela Frias contributed to this report.