Global stock markets braced for a sharp declines on Tuesday, with Asian markets sliding, after the House's rejection of a $700 billion financial bailout sparked a broad selloff in the U.S..

Japan's Nikkei 225 Average

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[JP;N225  Loading...      ()] closed down 4.1  percent Tuesday, hitting its lowest level this year, following the Dow Jones Industrial Average's 7 percent plunge. Australia's S&P/ASX 200 Index shed 4.3 percent.

US stock futures were pointing to a lower open on Tuesday as well. (Click here to check the latest US stock futures here)

• Market Fears Rise After Bailout Fails

"Short term, the market is getting crushed. But more importantly, we are telling clients we could be at the beginning of a whole new down phase," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.

He said the benchmark S&P 500 falling to the 1,000 level was not out of the question.

"We have to see what happens here," Strazzullo said. "It is totally uncharted. I think it is very difficult to gauge. It's not trying to predict an economic event. It's a political event and you never know what is going on behind the scenes."

Though Republicans and Democrats vowed to renegotiate a revised bailout proposal, it was unclear whether any plan would be able to pass Congress now.

• Check out credit market spreads

Analysts said the freezing of credit markets and signs that more and more banks are now succumbing to the strains stemming from the U.S. housing slump probably will fuel more volatility.

U.S. short-term interest rate futures surged higher on Monday, sharply increasing the implied chances for a big Federal Reserve rate cut in October due to worries about the economy and the financial system.

Futures now show more than a 50-percent chance that the Fed will slash its benchmark lending rate by 50 basis points in October, to 1.5 percent, up from 32 percent late on Friday.

"The big thing this market wants is some type of a resolution on whatever bailout plan we get," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio. "Fear seems to be really ramping up. Tomorrow's open is going to be the most anticipated opening since the reopening of the market on Sept. 17, 2001."

That day, which was a Monday, marked the first day of trading after the Sept. 11 attacks on the United States in 2001.

The failure of the bailout bill—after more than a week of intensive closed-door negotiations intended to hammer out a compromise plan—brought new uncertainty about the response of the U.S. government to the worst financial crisis since the Great Depression.

President Bush was set to huddle with economic advisers to consider the administration's next move.

Any action, however, might be complicated by the observation of Rosh Hashanah, the Jewish New Year holiday, from sunset on Monday, Sept. 29, until sunset on Wednesday, Oct. 1.

"The world is obviously looking for some type of leadership from the United States, but the crisis is bigger than just the U.S. obviously," said Detrick.

The White House Monday said it was "very concerned" about the financial markets, which were in turmoil after the House of Representatives rejected a $700 billion rescue plan for the U.S. financial system.

"We thought there would be enough support for this legislation on the Hill, we're very concerned about the markets," President Bush's spokesman Tony Fratto said on CNN.

He added that the White House wanted to hear from Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Asked about the markets plunging after the vote, Fratto said: "We never wish to see a decline in the markets. It's not something that we would want to see now."

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