Chinese stocks plummeted nearly nine percent Tuesday, their biggest drop in 10 years. Analysts say investors rapidly sold shares out of concern that Beijing is planning stricter measures to control the booming economy.
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The three major U.S. stock indexes - the Dow Jones Industrial Average, the broader S&P 500 Index, and the technology-heavy Nasdaq Composite Index - fell between three and four percent, wiping out all of the gains each index made so far this year.
Investors' dwindling confidence was knocked down further by a Commerce Department report which said orders for durable goods in January dropped by the largest amount in three months. On Monday, former Federal Reserve Board chairman Alan Greenspan said the U.S. economy could fall into recession by the end of this year.
Emerging markets in Latin America were also hit hard by Tuesday's developments.
In Europe, mining companies that rely on China's demand for industrial metals led the markets in major losses.
Over the past few years, China's economy and stock markets have boomed, prompting fears that excess investment could lead to inflation or excess industrial and property capacity, which could trigger a market collapse or a recession.
South Korea, Australia, and Singapore's indexes also dropped from record highs Tuesday. And Hong Kong's Hang Seng Index of blue chip stocks fell 1.8 percent to a four-week low, partly in reaction to the mainland drop in stock value.
Some information for this report was provided by Bloomberg.