Markets tumbled Tuesday on mounting fears of debt contagion in Europe and growing tension in the Korean Peninsula.
After losing 4.1 per cent last week, the Toronto Stock Exchange's S&P/TSX composite index fell 239.81 points, or 2.08 per cent, to 11,281.54 at the open.
On the New York Mercantile Exchange, oil fell $2.57 U.S. to $67.64 U.S. a barrel and gold rose $2.10 U.S. to $1,196.10 U.S. an ounce.
The Canadian dollar was trading at 92.41 cents U.S., down 1.91 cents on a surging U.S. dollar as investors fled riskier assets.
In the U.S. the Dow Jones industrial average fell 248.56 points, or 2.47 per cent, to 9,818.01, while the Nasdaq composite index was down 56.24 points, or 2.54 per cent, to 2,157.31.
"The Bank of Spain's takeover on the weekend of a small savings bank crippled by bad mortgages has fanned fears of wider bank failures to come in that country owing to its housing bust, which won't make it any easier for Spain to reduce its budget deficit," Sal Guatieri of BMO Capital Markets wrote in a morning note.
He added British government's announcement of aggressive measures to slash its deficit has investors worried that similar fiscal austerity moves across Europe will push the continent back into recession.
Markets were also rocky after an investigation revealed late last week that a South Korean naval vessel sunk last March was caused by a North Korean torpedo. According to Reuters, North Korean leader Kim Jong-il has ordered his military to prepare for combat and the U.S. has pledged to conduct military exercises in the Korean Peninsula.
In the U.S., Standard & Poor's/Case Shiller home price index was unchanged in March compared with February on a seasonally adjusted basis, better than the 0.3 per cent decline expected by Reuters' analysts. The index was up two per cent in the first quarter of 2010 compared with the same quarter a year ago.
London's FTSE lost 126.66 points, or 2.5 per cent, to 4,942.95 at midday. In Frankfurt, Germany's DAX fell 149.08 points, or 2.57 per cent, to 5,656.6, and the Paris CAC fell 114.51 points, or 3.34 per cent, to 3,316.42.
The Nikkei in Japan closed down 298.51 points, or 3.06 per cent, to 9,459.89, while Hong Kong's Hang Seng fell 682.26 points, or 3.47 per cent, to 18,985.5.
On Monday, the S&P/TSX composite index was closed for the Victoria Day holiday but the Dow was down 126.82 points, or 1.24 per cent, to 10,066.57, while the Nasdaq was down 15.49 points, or 0.69 per cent, at 2,213.55.
