Patrick O'Connell reports from Wall Street

The Dow Jones index lost 512 points on the day, to drop below the 8,000 level finishing at 7539.1. The one-day fall is a loss of more than 6% and larger than its 483-point decline over the whole of last week.

Much of New York's plunge happened after most other world markets had closed, setting the scene for a nervous start for European and Asian bourses on Tuesday.

The Dow Jones index has now fallen 19.2% since its high of 9337 on July 17, erasing all of its 17% gain over 1998.

Selling spree

Responding to the fall, the American Treasury Secretary, Robert Rubin, said the world was going through a difficult period, but the United States economy was in good shape to cope with it.

Correspondents say the economic problems in Asia and Russia, and concerns about Latin America, seem to have prompted some investors to reduce their exposure to the equity market until the situation clarifies.

Former US Treasury undersecretary Jeffrey Schafer: "Russia doesn't need money, it needs policy"

They say that, while Russia is a tiny trading partner for the United States, its crisis has sparked fears over the risks of other economies where bilateral trade is much larger. This has led to a selling spree by investors in New York.

BBC business correspondent Patrick O'Donnell says the big debate is whether this amounts to an over-reaction, since the economies of the US, China and Western Europe are relatively strong.

He says the key to the question over any looming global recession is how resilient they will now prove to be.

US economy fears

Getting nervous on Wall Street

Wall Street went into a slide soon after opening on Monday, with fears over Russia compounded by US domestic economic figures providing fresh evidence of economic slowdown.

Meanwhile, acting Russian prime minister Viktor Chernomyrdin failed on Monday to win parliamentary support to form a new government, dashing hopes of early action to stabilise the economy.

Other markets mirrored New York's early falls.

Traders on Germany's stock exchange are seeing red

Frankfurt's Dax index crashed through the important 5,000 points level, closing down 226 at 4,833 - a loss of nearly 4.5%.

The French CAC-40 index was soon deep in the red, ending the day at 3,651 - down 57 points or 1.5%.

London was spared the decision what to do after last week's losses. The City was closed for a holiday.

Russia

Trading on the Russian Stock Exchange has not much relation to real company values any more - and the volume of shares exchanged is so small that tiny deals can distort the main share index.

Demonstrators call on Russia's central bank chief, Sergei Dubinin, to resign

During the first hour of trading, only one deal was struck, for a mere $37,000.

Dealers said that the volume was one of the lowest ever recorded by the market, which has lost almost 85% of its value since January.

The market capitalisation of the whole Moscow share market is now about the size of two UK water utilities.

Official trading in the rouble was suspended again, for the fourth day running.

Asia

In the epicentre of the world's financial crisis, Asia, only Tokyo and Seoul had something to cheer about.

Thailand, where the Asian crisis started, is still in trouble

The Nikkei index gained 192 points or 1.4% to close at 14,107 lifting the Tokyo exchange off Friday's 12-year low.

South Korean shares gained 1.4% on hopes that the government would soon announce a stimulus package.

However, Hong Kong's Hang Seng index took a beating, losing 7.08% or 554 points to close at 7,275.04.