Global markets sank Tuesday, led by a 5.4 percent slide in Tokyo, as renewed jitters about the global economy set off a wave of selling in banking stocks.
Equity markets have been in a slump so far this year after a lackluster 2015. Several factors have kept investors in a selling mood, including falling crude oil prices, waning growth in China and increased risk of recession in other major economies if market volatility takes a toll on business confidence and investment.
Losses Tuesday were less severe in Europe than Asia. In early trading, France's CAC 40 was down 0.7 percent at 4,038.41 and Germany's DAX fell 0.5 percent to 8,933.11. Britain's FTSE 100 eased 0.1 percent to 5,638.21.
Futures augured more downside on Wall Street. Dow futures were down 0.5 percent at 15,915.00. S&P 500 futures dropped 0.5 percent to 1,843.90.
"There is a genuine concern that stress in asset markets will start affecting real economics," said Chris Weston, chief market strategist at IG in Melbourne, Australia.
"This period of sustained volatility and deterioration in credit will impact businesses and one has to be concerned about how many households are feeling this drawdown in the financial markets," he said in a market commentary.
The prospect of Federal Reserve rate increases after several years of ultra-easy monetary policy had also unnerved markets. But the prospect of hikes in the near term has faded because of the market turmoil.
In Asia, Japan's Nikkei 225 dived 5.4 percent to close at 16,085.44 and Australia's S&P/ASX 200 fell 2.9 percent to 4,832.10. Markets also fell in Southeast Asia. China, Hong Kong, Taiwan and South Korea were closed for Lunar New Year holidays.
Banking stocks were hammered by concerns that profits will suffer from another downturn in the global economy. National Australia Bank dropped 4.8 percent in Sydney and Mizuho Financial slid 6.2 percent in Tokyo.
Benchmark U.S. oil was up 73 cents at $30.42 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.20, or 3.9 percent, to close at $29.69 a barrel in New York on Monday. Brent crude was 53 cents higher at $33.42 in London. The contract dropped $1.18, or 3.5 percent, to close at $32.88 a barrel in London.
The euro rose to $1.1177 from $1.1186 on Monday. The dollar fell to 115.37 yen from 115.58 yen.