Losses on stock markets have continued after the collapse of fourth largest US investment bank, Lehman Brothers, which has filed for bankruptcy protection.
European stocks fell again; the UK's FTSE 100 was down 2.44%, France's Cac down 1% and Germany's Dax down 1.58%.
Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.
Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.
The FTSE 100 of leading UK shares fell 127 points to 5,077 shortly before midday. The Dax index of leading German shares was down 96 points at 5968 points and France's Cac 40 was down 45 points at 4,124 points.
Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.
Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.
The US stock market on Monday had its worst day's trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51.
Central banks around the world have been carrying out emergency measures on Tuesday to keep markets liquid.
The moves came as the interest rates at which banks lend to each other rocketed - as they did at the start of the credit crunch.
Overnight sterling Libor increased from 5.5% to 6.8%, and the dollar Libor rate increased from 3.1% to 6.4%.
* The Bank of England put an extra £20bn (25bn euros; £36bn) into short-term money markets "in response to conditions in the short-term money markets" - four times the sum seen on Monday after Lehman's collapse
* The Frankfurt-based European Central Bank said it had provided 70bn euros ($100bn; £56bn) in an emergency operation to keep money markets supplied with liquidity
* The Bank of Japan carried out two injections of a combined 2.5 trillion yen ($24.1bn; £13bn)
* Australia and India also pumped cash into their money markets
* And Japanese-registered Lehman Brothers Japan and Lehman Brothers Holdings have applied to the Tokyo District Court for bankruptcy protection
* Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%
* Barclays Bank - which today said it was in talks to take on some of Lehman's US operations - was one of the big fallers, down more than 5%
* In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%
On the currency markets, the dollar slid to a four-month low against the yen before recovering slightly. At 0820 GMT, it was down 0.7% at 103.70 yen having earlier dropped to 103.62 yen.
The euro was down to $1.4234, having hit $1.4482 on Monday.
The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, has raised fears that other financial institutions could be hit.
"We're in the middle of a crisis," said YK Chan at Phillip Asset Management in Hong Kong.
Meanwhile, there were fears that AIG, one of the world's largest insurers, could also face collapse.
The State of New York announced a "multi-billion dollar financing plan" on Monday to stabilise the insurer's finances.
'Rough spots' ahead
On Monday, US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses".
He said Americans could remain confident in the "soundness and resilience" of the US financial system.
But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.
Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".
But he gave no details of what such steps might mean.