Stocks in the United States have suffered their worst loss in seven weeks because of increasing concerns about the country's economic recovery. A disappointing outlook from the retailer Lowe's fell well short of Wall Street's expectations.
Analysts say weak data from Japan also had an effect on US investors overnight.
The Dow Jones Industrial Average lost 186 points, or 2 per cent, to close at 9,135.
Some analysts are saying "You have a market that's seen most sectors and stocks rise in tandem and so we should see a pretty orderly pullback. We're still only down 2% or 3% from the highs. People are worried we've run too far, too fast and that we still have a long way to go in terms of the economy. There are concerns about a double-dip recession."
LONDON - European stock markets closed sharply lower, with London's FTSE 100 index of leading shares down 68.96 points, or 1.46 per cent, at 4645.01 points.
FRANKFURT - The Dax dropped 107.5 points, or 2.02 per cent, to 5201.61.
PARIS - The CAC 40 fell 75.58 points, or 2.16 per cent, to 3419.69.
TOKYO - Japanese shares suffered their steepest fall in more than four months, weighed down by a stronger yen and heavy losses on the US and Chinese markets.
The benchmark Nikkei-225 index ended down 328.72 points, or 3.1 per cent, at 10,268.61.
HONG KONG - Hong Kong share prices tumbled to close 3.62 per cent lower, following a slump on Wall Street at the end of last week on the release of weak US economic news, dealers said.
The benchmark Hang Seng Index closed 756.26 points lower at 20,137.07.
The Australian share market is expected to open lower after Wall Street fell more than two per cent overnight. At 0651 AEST on the Sydney Futures Exchange, the September share price index contract was 46 points lower at 4316.
In economic news on Tuesday, the Reserve Bank of Australia (RBA) releases minutes of its August 4 monetary policy meeting and the Melbourne Institute issues its wages report for the August quarter.
Benchmark crude for September delivery fell 76 cents to settle at $US66.75 a barrel on the New York Mercantile Exchange.
Gold down $12.9 to US$935.80 an ounce Silver down 74.7c to US$13.975 an ounce Copper down 6.55c at US$2.770 a pound
(Buying low priced stocks. These stocks are usually cheap due to problems. Many institutional investors don't look at low priced shares and institutional sponsorship is one of the ingredients needed to help propel a stock's price higher)
