Hong Kong’s Hang Seng Index and the Shanghai Composite Index also lost over 5 percent.
U.S. stock markets were closed on Monday for a holiday, but investors in Asia and Europe were carrying through from last week's concern on Wall Street that a fiscal stimulus proposed by President George W. Bush would not be enough to stop the U.S. economy from falling into recession.
Bush called for a package worth up to $150 billion in tax cuts and other measures.
Stock markets have been in full retreat this year over the economic fears. The broad U.S. S&P index had its biggest weekly fall since July 2002 last week.
Many indexes are now more than 20 percent below their recent cycle peaks, a traditional sign that what is going on is not just a correction but the start of a bear market.
Such falls sometimes signal to large investors that it is time to buy. But leading investment bank Morgan Stanley said on Monday that that was not the case now, at least as far as Europe was concerned.
"We are not compelled to buy yet despite bearish sentiment," its European equity strategy team said in a note. "We continue to prefer cash over equities."
"(Global stocks) are officially in a bear market," Craig Howard Russell, chief market strategist, China from Saxo Bank told "Worldwide Exchange." "We really feel this is the beginning of something, not just the end, and we’re going to move lower globally across the board in the next few weeks," Russell said.
In morning trading, the Paris CAC-40 was off 21 percent from its recent highs, with London's FTSE-100 off more than 15 percent and the DAX down more than 13 percent.
"Getting pummelled," said Henk Potts, equity strategist at Barclays Stockbrokers, of the global selloff. "A mixture of weak global economic data, poor corporate data, increasing fears about the possibility of a recession ... have left investors drowning in a sea of red."
Wall Street stock index futures tumbled too -- with Dow futures down more than 350 points -- but the effect of plummeting futures would have to wait until Tuesday as the U.S. market is shut for the Martin Luther King, Jr. Day holiday.
The dollar gained against the euro and sterling, during the stock selloff, as investors' risk aversion grew. But the U.S. currency was firmly lower versus the yen.
“For the moment the dollar is benefiting from people being short … but when people want to buy, it isn’t going to be the dollar,” Adrian Schmidt, senior foreign exchange strategist at RBS told “Power Lunch Europe.”