Global stocks took it on the chin after Greece said it would not be able to meet its deficit target, jeopardising vital aid and putting the risk of bankruptcy on the horizon.
Banking stocks were the worst hit as Britain's FTSE 100 slipped 1.6 per cent, France's CAC 40 fell 2 per cent and Germany's DAX lost 2.3 per cent. Japan's Nikkei sank 1.8 per cent, while Hong Kong's Hang Seng plunged 4.4 per cent.
U.S. stock futures indicated a soft opening as well, with Dow futures down 35 points, or 0.3 per cent, at 10,806 and S&P 500 futures falling 3.7 points, or 0.3 per cent, to 1,122.30.
Greece said that it wouldn't meet its target of cutting its deficit to 6.5 per cent of gross domestic product in 2012, as originally agreed with bailout creditors. The deficit will amount to 6.8 per cent of GDP instead. Debt inspectors are reviewing its reforms to see if Athens qualifies to receive the next 8-billion-euro installment of rescue funds, without which Greece will run out of money in mid-October.
Belgian and French finance ministers will meet on Monday to discuss ways to shore up the balance sheet of troubled Franco-Belgium group Dexia , which has one of the largest exposures to Greece among non-Greek banks, according to a French daily Les Echos report.
Also depressing sentiment was news that manufacturing activity in Europe and Asia slumped in September to levels not seen since the depths of the financial crisis as export demand dropped.Corresponding figures for the United States due later on Monday are expected to emphasise the grim outlook for the global economy.
U.S. crude oil extended losses, down 91 cents to $78.29 (U.S.) a barrel.
Copper fell more than 5 per cent to its lowest since July 2010. Benchmark copper on the London Metal Exchange declined to a session low of $6,635 a tonne.
Gold, a traditional haven in times of turmoil, rose 2.5 percent to $1,662.50 an ounce.
The Canadian dollar traded at 95.47 U.S. cents.