Global stock markets plunged on Monday as fears spread that the turmoil in US mortgage markets is spreading. Indexes in Europe fell as much as 7 per cent after a huge sell-off in Asia.

“There’s something approaching panic in the market,” Holger Schmieding, the chief European economist at Bank of America in London, said. “There’s been a reassessment in the market of the US economic outlook, with most people now thinking that there will be a recession,” and investors are starting to reconsider the idea that the rest of the world “will remain aloof from US problems.”

The selling began in Sydney, with Australian stocks falling nearly 3 per cent for an 11th consecutive decline. Major markets in Asia followed suit, with the benchmark Nikkei 225-stock average in Tokyo falling 3.9 per cent, the Hang Seng in Hong Kong falling 5.5 per cent and the benchmark mainland Chinese index falling more than 5 per cent.

European shares were on track for their biggest decline in more than four and a half years as US recession fears rattled investors. At the close, Dow Jones Euro Stoxx 50 was down 7.3 per cent. The CAC 40 index in Paris was down 6.8 per cent, having fallen more than 7 per cent at one point. The Dax 30 in Frankfurt was down 7.1 per cent, and the FTSE 100 in London was down 5.5 per cent.

Stocks followed suit when markets opened in the western hemisphere. Canadian stocks were down 4.5 per cent at midday, and a key market index in Brazil was off 6.6 per cent.

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