|Tokyo share prices fell by more than four per cent, entering another day of selloffs after Wall Street's overnight slide [AFP]
Deep-rooted jitters about the US debt rating cut sent world stocks tumbling to near 11-month lows on Monday, overshadowing relief that the European Central Bank was buying Italian and Spanish bonds.
Having seen some $2.5 trillion wiped off its global share values last week, MSCI's all-country world stock index
was down a further 3.8 per cent, its lowest level since late September last year.
In the US, the Dow Jones Industrial Average closed down 5.55 per cent, Nasdaq down 6.90 per cent and the S&P 500 down 6.66 per cent.
To calm the tumbling markets, US President Barack Obama said during a press conference on Monday that tax reform and further spending cuts were critical to the US economic recovery.
"My hope is Friday's [debt downgrade] news will give us a renewed sense of urgency," Obama said. "I assure you we will stay on it until we get the job done."
On Monday, Asian stock exchanges also posted sharp losses, European bourses closed significantly lower and emerging market stocks fell 3.3 per cent.
Meanwhile, the price of gold streaked past $1,700 an ounce for the first time ever on Monday, pushing up more than three per cent.
Beset by worries about financial problems in the US and Europe - and slowing global growth - investors sought safety in the metal as stocks moved downward.
Al Jazeera's Cath Turner, reporting from the New York Stock Exchange, said the S&P downgrade was only one factor for investors.
"But [today's decline] is not a surprise, as there was expected to be a lot of volatility," our correspondent said.
John Dobosz, the deputy editor of Forbes magazine, told Al Jazeera that "you can't make correlation between downgrade of sovereign debt and the performance of an equity market."
"Today's been a horrible day for US stocks - a crushing blow. But our credit is still very good," he said.
European stock markets, meanwhile, were turning firmer in early trade after sharp losses a day earlier caused by speculation over the prospect of a global downturn.
London's FTSE 100 index dropped 0.55 percent right at the opening, with Frankfurt's DAX 30 down 0.46 percent but they then moved into positive territory while Paris' CAC 40 rose 0.21 percent.
In Madrid, the Ibex-35 slid 2.44 per cent and Milan's FTSE MIB tumbled 2.43 per cent.
The European Central Bank said on Sunday that it would "actively implement" its controversial bond-buying programme to fight the euro zone's debt crisis.
After a rare Sunday night conference call, the ECB welcomed announcements by Italy and Spain of new deficit cutting measures and economic reforms, as well as a Franco-German pledge that the euro zone's rescue fund would take responsibility for bond-buying once it is operational, probably in October.
The Asian markets also felt the day's uncertainty. The benchmark Nikkei-225 index of the Tokyo Stock Exchange closed down 2.18 per cent at 9,098 on Monday, as South Korea's KOSPI index closed down nearly four per cent at 1,869.45 points. The KOSPI had briefly plunged more than seven per cent earlier in the day.
Australian stocks fell by more than 2.9 per cent, closing at 3,986 points, while India's Bombay SENSEX index fell 1.82 per cent to 16,990.18 at the close of trade.
"No one really fully understands the full implications of this [US] credit downgrade, which is why we have seen the market sold off hard. It's a classic case of sell first, ask questions later," Ben Potter, an analyst at IG Markets, said.
Hong Kong's Hang Seng index slid 2.17 per cent to close at 20,491 points, while China's Shanghai Composite Index dropped 3.62 per cent to close at 2,531 points.
"There were a lot of questions whether we would see a reaction in Shanghai and Shenzhen [to the downgrading of US debt]. The Chinese stock exchanges tend to look inwards, to react to domestic issues such as inflation figures .... But certainly it looks like what S&P has done over the weekend is affecting traders here," reported Melissa Chan, Al Jazeera's correspondent in Beijing.
Patrick Chovanec, a business professor at Beijing's Tsinghua University, told Al Jazeera that the market's "concerns are much broader than just S&P's downgrade of the US debt. That is one issue that is contributing to a much broader set of concerns - the debt crisis in Europe [and an] apparent slowdown in the US recovery".
Futures pointed towards losses on Wall Street when it opens on Monday, with the Dow Futures trading down 225 points (two per cent) and S&P 500 Futures down 2.1 per cent.
Gold, meanwhile, surged to yet another record high, opening at $1,686.00-$1,687.00 an ounce in Hong Kong.
G7 and G20 pledges
The statement from the ECB marked a watershed in its fire-fighting efforts, after modest bond-buying last week failed to stem contagion to the currency bloc's larger economies.
Our correspondent Jonah Hull reports from Frankfurt on the effect of ECB bond buying on markets
It did not explicitly say that effort would now include buying Spanish and Italian paper, but the fact that last week's purchases were confined to Irish and Portuguese paper drove Italian and Spanish 10-year paper to a 14-year high.
Group of 20 finance chiefs and central bankers said on Monday, meanwhile, that they would "remain in close contact through the coming weeks and co-operate as appropriate" and that they were "ready to take action to ensure financial stability and liquidity in financial markets", according to a statement.
"No change in fundamentals warrants the recent financial tensions faced by Spain and Italy. We welcome the additional policy measures announced by Italy and Spain to strengthen fiscal discipline and underpin the recovery in economic activity and job creation," the G7 finance ministers and central bank governors said in a statement released early on Monday.
The G7 statement came after global leaders and finance ministers held emergency consultations to discuss the twin debt crises in Europe and the United States.
Christine Lagarde, the chief of the International Monetary Fund, welcomed the move.
"This cooperation will contribute to maintaining confidence and spurring global economic growth," Lagarde said in a statement.
US credit downgrade
Investors were seemingly unimpressed by weekend talks between industrialised countries aimed at safeguarding the smooth functioning of financial markets following agency S&P's cut in its US rating late on Friday to AA+ from AAA.
"It won't be long now before other ratings agencies follow suit, considering the state of US finances. One thing is for certain, and that's that volatility will continue to remain high, making trading conditions difficult," Angus Campbell, head of sales at Capital Spreads, said.
Moody's repeated a warning on Monday it could downgrade the US before 2013 if the fiscal or economic outlook weakened significantly, but said it saw the potential for a new deal in Washington to cut the budget deficit before then.
Timothy Geithner, the US treasury secretary, sought to reassure investors before the markets opened by slamming a historic US credit downgrade as a "terrible judgement" and insisting the US economy is strong.
"I think S&P has shown really terrible judgement, and they've handled themselves poorly. They have shown a stunning lack of knowledge about basic US fiscal budget math, and I think they came to exactly the wrong conclusion," Geithner said.
Carol Sirou, the regional head and president of S&P France, said on Monday that the market turmoil was "due more to an economic slowdown than the ratings agencies".
"Everyone seems to have just discovered we exist but we have been rating businesses and countries for decades," Sirou said in remarks to the Liberation daily on Monday.
"The role ascribed to us is much greater than is really the case," Sirou said.