The downward trend, extending through Asia into Europe, followed another day of grim developments in the United States, the world's biggest economy, undermining hopes that coordinated action by governments around the world could keep the global downturn from getting worse.

The main European stock markets slumped in early trading, with FTSE 100 index of top equities in London shedding 0.98 per cent to stand at 4,360.91.

Frankfurt's DAX 30 was down 1.78 per cent to 4,936.60 points, while in Paris the CAC 40 index slid by 1.61 per cent to 3,449.27 points.

Russian shares also fell heavily in early trading and activity on one of the two markets, Micex, was suspended.

Meanwhile, the euro fell against the dollar and the yen in Asian trading ahead of a German business confidence survey that is expected to add to the economic gloom in Europe, dealers said.

European markets, which had risen on Monday in response to a massive stimulus package in China, pursued the pattern of wild volatility which has marked market for many weeks and fell on Tuesday under the weight of bad corporate news.

Fannie Mae, the US mortgage giant bailed out by the government earlier thisyear, posted a US$29 billion (S$43.4 billion) loss. Meanwhile Washington expanded its bailout of insurer AIG to more than US$150 billion.

The latest dire reports triggered more strains for Asian stock markets, which lost ground on Tuesday in line with US shares overnight. Tokyo lost 3.0 per cent while Hong Kong share prices closed 4.8 percent lower. Chinese and Taiwanese share prices also posted losses.

Fresh reports of ailing companies did not help matters.

In Tokyo, a survey found that corporate bankruptcies in Japan had soared 13.4 per cent from the year earlier to claim 1,429 companies in Oct - the most so far this year.

In the US, General Motors CEO Rick Wagoner had said that the company he heads would need state help before president-elect Barack Obama takes over the White House in January, telling industry publication Automotive News that time was of the essence and noting the entire US auto industry was also suffering.

The New York Times reported on Tuesday that Mr Obama had asked President George W. Bush for immediate aid for the struggling US auto industry during a White House meeting on Monday.

For its part, US electronics retailer Circuit City said on Monday it had filed for bankruptcy protection and obtained a US$1.1 billion dollar credit lifeline to battle a sharp decline in sales.

Just a week after announcing it would close 155 stores and take other restructuring measures to fight a cash crunch, the firm became the first major US retailer to file for bankruptcy protection since the crisis began.

And Canadian telecommunications equipment provider Nortel Networks posted a third-quarter loss of US$3.4 billion and announced 1,300 job cuts.

There were scattered bright spots however. China said on Tuesday its trade surplus hit a monthly all-time high of US$35.2 billion in Oct, on the back of surging exports.

Beijing also said its four-trillion-yuan (S$878 billion) economic stimulus plan was the best way of helping the international community fight the economic crisis - but declined to specify whether it would reduce China's contributions to any global rescue effort that might be agreed on.

Leaders of the G20 group of biggest developed and emerging nations hold talks in Washington on Saturday aimed at restoring market confidence and stability.

US officials have said the summit is likely to result in an 'action plan' including short-term steps to help fix the global economy, while other countries, notably France, have pushed for the talks to agree concrete steps.

Ahead of the summit, British Prime Minister Gordon Brown said the current turmoil represented an opportunity to rebuild the global financial system.

The G20 'must use the power of multilateralism to establish a global consensus on a new, decisive and systemic approach to strengthening the global economy,' Mr Brown said. -- AFP