Global markets continue to fall

Global markets have been gripped by fears for the financial sector

After a volatile day's trading, US and European markets closed lower on Tuesday as investors continued to fear for the health of the global economy.

The UK's FTSE 100 was down 3.2% at a six-year low, France's Cac 40 dropped 1%, while Germany's Dax fell 0.52%.

On Wall Street, the broader S&P 500 index closed under the 700 level for the first time since October 1996.

The Dow Jones index lost 0.55% following cautionary comments from Federal Reserve chairman Ben Bernanke.

Mr Bernanke warned of stagnation if the US authorities did not move "aggressively" to stimulate the economy.

"His comments were a reality check for the market that nothing changed between yesterday and today," said Jim Awad, managing director at Zephyr Management in New York.

There's going to be more pain before there's a turnaround Lucinda Chan Macquarie Private Wealth

"It renewed fears that there is no bottom in terms of toxic assets and no bottom in terms of need for capital."

Earlier, Japanese stocks traded close to 26-year lows before staging a modest recovery.

The Nikkei 225 index fell sharply before recovering to close at 7,229.7, down 0.69% on the day.

Hong Kong's Hang Seng index fell 1.9%, while India's main Mumbai index ended down 2.3%.

'Global sell-down'

On Monday, the Dow Jones had fallen below 7,000 points for the first time since 1997.

"There's just a lot of fear driving the markets right now," said Lucinda Chan at Macquarie Private Wealth.

"The market is consumed by the global sell-down at the moment, and I think there's going to be more pain before there's a turnaround."

In Japan, analysts said talk of a fresh government stimulus plan was unlikely to help revive the stock market.

"Unless markets overseas stop falling, there's nothing we can do, no matter how hard we try," said Yutaka Miura, an analyst at Shinko Securities.