Asia markets recover after tumbling

(CNN) -- Japan's Nikkei rebounded above 10,000 before midday on Tuesday, paring its losses after dropping more than 5 percent in early trading.

The recovery brought losses to about 2 percent, while South Korea's KOSPI index was up fractionally and Australia's All Ordinaries was up 1.9 percent.

Early losses were in response to Wall Street's drop on Monday below 10,000 for the first time since October 2004, as the credit crisis tightened its grip on banks and other financial institutions. The Dow erased more than half those losses, finishing the day down 3.6 percent.

The most influential European markets also suffered big losses. London's FTSE 100 ended down 7.9 percent, the biggest one-day fall since 1987; the CAC 40 in Paris skidded 9 percent, and the XETRA DAX in Frankfurt tumbled 7.1 percent.

Russia's RTS index fared worse, shutting down after falling more than 20 percent. The index lost 9 percent of its value in the first 30 minutes of the trading day. Watch how falling oil is hitting Russia »

Iceland halted trading in six bank stocks Monday. Icelandic banks' assets dwarf the rest of its economy and its currency has fallen sharply in the past week.

The government rushed to draft a plan to deal with the financial turmoil's impact on its over-leveraged banking sector.

In Brazil, stocks lost up to 15 percent. Argentina's Merval Index of the Bolsa de Comercio de Buenos Aires tumbled more than 11 percent, driven principally by stocks linked to petroleum industry companies Tenaris and Petrobras.

The slides Monday come amid days of unrelenting financial turmoil and despite the passage by U.S. lawmakers of a $700 billion bailout plan late Friday.

"What we thought was going to be a contained domestic (U.S.) problem is definitely global," William Larkin, portfolio manager at Cabot Money Management, told CNNMoney. "It is now rooted in Europe, and it looks like it is probably spreading to Asia."

The slump followed a weekend in which Germany's private financial sector promised to put up an additional €15 billion ($20.3 billion), in addition to the €35 billion already pledged, to help shore up Hypo Real Estate bank, the nation's Finance Ministry said Sunday.

In France, BNP Paribas committed to taking a 75 percent stake in troubled European bank Fortis NV, and Sweden and Denmark followed Ireland and Britain in raising the amount of savers' deposits guaranteed by the government.

Britain's treasury chief Alistair Darling said he was "ready to do whatever it takes" to get the country through the credit crunch, and was looking at a "range of proposals," The Associated Press reported.

European Union finance ministers were to meet in Luxembourg Monday and Tuesday to discuss ways to boost the battered banking system.

Italian Prime Minister Silvio Berlusconi is pushing a bailout similar to the one passed by the U.S. Congress last week and signed by President Bush on Friday.

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