European markets followed Asia lower, with benchmarks in Britain, Germany and France trading down more than 4 percent in early trading. The FTSE 100 index was 190.31 points, or 4.9 percent, lower at 3,693.05, while Germany's DAX was down 182.81 points, or 4.3 percent, at 4,112.86. France's CAC-40 was the worst performing European index, down 184.65 points, or 5.8 percent, at 3,009.14.
"Worries about the impact of the surging yen on Japanese export earnings have hit the Nikkei hard," said Julian Jessop, chief international economist at Capital Economics.
"This in turn has led to sharp falls in European markets even when, as on Friday, the U.S. had closed higher the day before," he added.
Dow futures were down 268 points, or 3.2 percent, at 7,994. Standard & Poor's 500 futures were down about 4 percent.
Mounting concerns about the yen and the effect of the financial crisis on currency markets prompted the world's seven leading industrial nations to issue a statement Sunday warning about the "recent excessive volatility" in the value of the Japanese currency, which is rising against the U.S. dollar towards the 90 yen level and near 13-year highs.
"We continue to monitor markets closely, and cooperate as appropriate," the G7 said.
The statement has raised the prospect of coordinated intervention to stem the yen's appreciation.
"Although action could emerge at any time, it seems to us that it would achieve its maximum impact were it seen to be led by the U.S. Treasury," said Simon Derrick, currency strategist at Bank of New York Mellon.
"The New York morning today may therefore provide an ideal opportunity for them to make a clear statement of intent," he added.
The euro and the pound continued to drop, with the pound 3.4 percent lower at $1.54 and the euro down 1.8 percent down at $1.24. The euro is under pressure from fears about banks' exposure to emerging markets and expectations the European Central Bank will cut interest rates.
As well as potentially coordinating action in the currency markets, there's growing speculation that the world's leading central banks may cut interest rates together soon to help calm markets and provide some impetus to the stalling global economy. The U.S. Federal Reserve is already expected to cut its benchmark interest rate a half percentage point to 1 percent at a two-day meeting that ends Wednesday.
Economic data this week is likely to further stoke concerns about the global economy. Earlier Monday, the well-respected Ifo Institute in Germany reported that its main activity index fell to a five-year low 90.2 in October.
Monday's sharp stock market declines came amid another round of government measures to boost markets. In South Korea, the central bank slashed its key interest rate Monday by three-quarters of a percentage point - its biggest cut ever - to prevent Asia's fourth-largest economy from lurching into recession.
And Australian and Hong Kong central bankers injected funds into their markets to ensure liquidity.
In Europe, the International Monetary Fund said Sunday it had reached a tentative agreement to provide Ukraine with $16.5 billion in loans and announced that emergency assistance for Hungary had cleared a key hurdle.
Only South Korea's market managed to eke out gains, perhaps in part because of the big rate cut there. The benchmark Kospi ended 0.8 percent higher at 946.45.
In mainland China, the benchmark index slumped to its lowest level in more than two years as investors reacted to dismal earnings reports. The Shanghai Composite Index lost 6.3 percent, or 116.27 points, to 1,723.35. It is now down about 72 percent from its peak about a year ago.
In the Philippines, the key index plummeted 12.3 percent to 1,713.83 points, triggering a circuit-breaker that automatically halted trading for 15 minutes. The biggest one-day drop since February 2007 was caused by "big fund players" withdrawing investments to get cash and meet redemptions at home, traders said.
In Japan, stocks fell despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.
"The reported plan by the government hardly cheered investors. What the market really wants is a package of stimulus measures to boost the Japanese economy," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC Co. Ltd.
Citing unidentified sources, the Yomiuri newspaper said Monday the government is considering injecting public money worth 10 trillion yen ($108 billion) into struggling banks in a bid to stabilize the financial market hit by sagging stocks and a soaring yen.
In oil, crude prices weakened after OPEC's move to cut production in an attempt to halt the declines. Light, sweet crude for December delivery was down $2.24 to $61.91 a barrel. Oil prices have plunged more than 57 percent from a record $147.27 in mid-July.
AP reporters Jeremiah Marquez in Hong Kong and reporters Tomoko A. Hosaka in Tokyo, Elaine Kurtenbach in Shanghai, Hrvoje Hrankski in Manila and Kelly Olsen in Seoul contributed to this report.