Global markets drop after U.S. plunge

Paulson sees larger Fed role

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LONDON (CNNMoney.com) -- Global stock indexes fell Tuesday, led by sharp declines in Asia, a day after Wall Street swooned upon confirmation that the U.S. is in a recession.

U.S. futures, which offer an indication of how markets will open when trading begins in New York, were slightly higher.

In Europe, major indexes pared losses. Britain's FTSE was down 1.4% in morning trading. The CAC-40 in France was down 1.2% and Germany's DAX was off about 0.5%

The mood was glum Tuesday after a sharp drop on Wall Street overnight and another fall in commodity prices.

Japan's benchmark Nikkei index sank 6.4%, while the Hang Seng index in Hong Kong tumbled 5.1%. In South Korea, Seoul's KOSPI lost 3.5%.

Australia's All Ordinaries shed 5% after the country's central bank announced it would cut its benchmark interest rate by a full percentage point to 4.25%.

Oil futures fell to their lowest level in three years Tuesday as investors bet the dismal global economic outlook would cut into demand.

U.S. crude for January delivery was down $1.50 to $47.78 a barrel, the lowest since 2005, in electronic trading on the New York Mercantile Exchange.

Wall Street tanked Monday after the National Bureau of Economic Research (NBER) confirmed what many have long believed -- that the U.S. economy is in a recession.

According to the NBER, the official body that calls economic cycles, the U.S. has been in a recession since December 2007.

The Dow Jones Industrial Average lost 680 points, its fourth-biggest single-session decline on a point basis ever. The decline was 7.7% in percentage terms -- the 12th worst percentage one-day decline ever. It ended at 8,149.

The Standard & Poor's 500 index fell 8.9% Monday, and the Nasdaq composite plunged 9%.

Year-to-date, the Dow is down 38.6% and has lost 42.5% from its record close of 14,164.53 on October 9, 2007.

CNN Wires contributed to this report