A passerby uses his mobile phone to take a photograph of a display showing the closing benchmark Hang Seng Index in Hong Kong October 27, 2008. Hong Kong shares plunged 12 percent in their biggest single-day drop since 1997 on Monday, led by blue-chip heavyweight HSBC, as fears of a global recession hit Asian financial markets. [Agencies]

South Korea's KOSPI was the only Asian bright spot, closing up nearly 1 percent. The index rallied after the country's central bank slashed its key interest rate yesterday by three-quarters of a percentage point - its largest cut ever - in an effort to fend off the global financial turmoil.

Markets in Singapore and Malaysia were closed for holidays.

Selling spread to Europe when markets opened there. But European stock markets recovered much of their early losses, helped by investors looking for bargains after sharp drops in Asia overnight

Britain's FTSE 100 index was 0.2 percent lower at 3875 after having been down 4.9 percent in the morning. Germany's DAX, which was likewise down almost 5 percent earlier, recovered to trade only 0.5 percent lower at 4276.

The CAC 40 in France fared worse, falling 2.1 percent at 3126 after being almost 7 percent lower.

With the US Federal Reserve almost certain to slash interest rates later in the week, British Prime Minister Gordon Brown hinted that central bank action may be more widespread.

"Now inflation is actually coming down over the next few months and that will mean that it gives scope to all the monetary authorities, including the Bank of England, round the world to make a decision about interest rates," he told the BBC.

The Dow Jones industrial average was down just 7.65 points, or 0.1 percent lower, at 8371.30 in early trading. They were almost 1 percent lower on the open.

A man watches information on a computer screen at a brokerage house in Shanghai October 27, 2008. China's main stock index sank more than 3 percent on Monday to its lowest in two years, led by large caps on worries about lower-than-expected corporate earnings and weakness in overseas markets. [Agencies]

Agencies - China Daily