Wall Street stocks have fallen sharply over concerns about deadlocked US budget talks and that Europe's debt crisis could spread to Italy.
European shares were also weighed down by debt fears, the BBC reports. Eurozone finance ministers were holding talks on a new aid plan for Greece, overshadowed by fears of contagion spreading to Italy and Spain.
The Dow Jones industrial average closed down 151.44 points at 12,505.76.
The Standard & Poor's 500 Index fell 24.31 points to 1,319.49, while the Nasdaq Composite Index was down 57.19 points at 2,802.62.
In Europe, London's FTSE 100 fell 1%, Germany's DAX was down 2.3% and France's CAC 40 slipped 2.7%
On Monday, the NZX50 had fallen 22 points to 3434, the Australian 200 Index was up 72 points at 4582 and in Tokyo, the Nikkei was down 68 points to 10,070.
In currency markets, the New Zealand dollar was trading at 82.92 US cents, 77.86 Australian, 52.09 pence, 66.43 yen and 0.5911 euro. The TWI stood at 72.06.
Brent futures for August fell $1.09 to settle at $US117.24 a barrel.
Gold was trading at $US1,548.24 an ounce.
