The Australian stock market has lost all that it gained since October 2006, with the S&P/ASX200 benchmark suffering its biggest one-day fall on record on Tuesday January 22.
The 7.1 per cent drop surpassed that of the 1997 Asian crisis and just fell short of the historic "Black Monday" 7.5 per cent drop of October 1987.
Wall Street, closed for a holiday overnight, was also expected to fall when it resumed trading amid fears that the world is set for an economic slowdown.
The Australian share market lost more than 20 per cent since its November high, closing down 7.3 per cent from the day before.
With the All Ordinaries Index losing 409 points to 5222, the market reached lows not seen since October 2006. The ASX 200 shed 394 points to 5187.
Asian markets followed the global trend and also went into decline.
Japanese share prices tumbled almost 4.5 per cent during morning trade, slipping below the key 13,000-point level for the first time since October 2005. Hong Kong stocks opened sharply lower, down 5 per cent while Chinese share prices lost 5.1 per cent.
The turmoil across the Asian markets has been attributed to rising fears of a recession in the United States. A spike in the value of the yen has not helped either.
Trading on the Bombay Stock exchange, BSE was halted as the benchmark Sensex tumbled 2029 points, crossing the limit of 10 per cent.
In an effort to calm investors, Indian Finance Minister P. Chidambaram pointed out the problem lay in "continuing uncertainties" of the global economy and that the fundamentals of the Indian economy were strong, The Hindu reported.
"Worries of the Western world should not be allowed to overwhelm us," Mr Chidambaram said.
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