Stocks in the United States tumbled on Monday as financial shares were battered by fears of more turmoil in the credit and housing markets.
Oil prices also rose more than 1%. US oil for September delivery gained $US1.47 to settle at $US124.73 a barrel.
Federal regulators seized two more failed US banks late last week, triggering a triggering a sharp sell-off in financial shares. Major indexes down more than 2%.
Merrill Lynch was down more than 11%; Citigroup by more than 7% and Lehman Brothers was down more than 10%.
Two weeks after the Federal Deposit Insurance Corp seized IndyMac Bancorp Inc, the Office of the Comptroller of the Currency said late on Friday it had closed First National Bank of Nevada and First Heritage Bank NA of California.
Shares of mortgage finance companies Fannie Mae and Freddie Mac also plunged, reversing gains seen since Congress approved a rescue plan for the US housing market at the weekend.
The Dow Jones industrial average sank 239.61 points, or 2.11%, to 11,131.08. The Standard & Poor's 500 Index shed 23.39 points, or 1.86%, to 1,234.37. The Nasdaq Composite Index lost 46.31 points, or 2%, to 2,264.22.
Trading volume was light on the New York Stock Exchange, with about 1.17 billion shares changing hands. About 1.96 billion shares were traded on the Nasdaq.
Other markets also down
European stocks also ended lower on Monday, as banks fell on concerns over credit ratings at major US mortgage lenders and by a rise in crude oil prices.
Standard & Poor's warned on Friday it may cut its ratings on Fannie Mae and Freddie Mac.
UBS fell 5.5%, Royal Bank of Scotland dropped 4.7% and Barclays lost 5.3%.
The pan-European FTSEurofirst 300 index ended down 0.9% at 1,158.86 points.
In Frankfurt, the DAX index ended at 6,351.15 points, down 85.56 or 1.33%. In Paris, the CAC-40 index closed at 4,324.45 points, down 52.73 or 1.2%. In Zurich, the Swiss market index closed at 6,968.93 points, down 46.1 or 0.66%.
In Britain, the FTSE 100 ended 40 points lower, 0.8%, at 5,312.6 after losing 0.4% last week. The index is down nearly 18% to date this year.
In Tokyo, the Nikkei averagewas up 19.02 points, 0.14%, at 13,353.78.
In Hong Kong, shares fell 0.24% on the lowest turnover in nearly 16 months. The Hang Seng closed down 53.50 points at 22,687.21.
Australia & NZ
The Australian 200 Index shed another almost 1% - down 48 points to 4922 - adding to a decline of 3.4% the previous session, after a profit warning by the Australia and New Zealand Banking Group.
The NZX 50 closed up slightly on Monday - by 2 points at 3256.
In the currency markets: on Tuesday morning, the New Zealand dollar was trading at US74.48 US cents, 77.78 Australian cents, 37.32 pence, 80.02 yen and 0.4727 euro. The Trade Weighted Index was at 66.38.
