Asian markets plummet in line with Wall St (UPDATE)

Asian share markets were in headlong retreat Tuesday after another bloodbath on Wall Street sparked by the U.S. credit downgrade and the debt crisis in Europe.

The Japanese and Australian markets sank 2.0 percent at the opening bell, and as the sun rose over the rest of the region the outlook for stocks only grew darker.

Read More from GlobalPost: Wall Street collapse, time to face the ugly truth about the US economy

By noon in Tokyo the Nikkei index had plummeted 4.43 percent, Hong Kong's Hang Seng index was a whopping 7.24 percent in the red and Sydney had dumped 4.91 percent as "panic" selling took over, analysts said.

Seoul lost 7.5 percent, Taipei was more than five percent weaker and Shanghai was down 2.51 percent, according to AFP news agency.

"It's a horrible place to be, dark days are upon us," IG Markets institutional dealer Chris Weston said in Melbourne, Australia.

"People are trading on emotions at the moment rather than looking at the rational situation. There's widespread panic."

Trade was volatile throughout the day and some of the declines were clawed back in the afternoon, The New York Times reported. Seoul finished 3.6 percent down, Tokyo fell 1.7 percent and Hong Kong lost 5.7 percent.

Read More from GlobalPost: Wall Street has its worst day since the 2008 financial crisis

If they had slept at all after heavy selling on Monday, Asian investors woke on Tuesday to the news that Wall Street's Dow Jones Industrial Average fell 5.55 percent or 634.76 points — its steepest one-day drop since late 2008 — to close at 10,809.85.

The broader S&P 500 dived 6.7 percent to 1,119.46 while the Nasdaq plunged 6.9 percent to 2,357.69.

Futures on the S&P 500 slumped more than three percent in Asian morning trade, suggesting Wall Street could expect another round of selling on Tuesday, the New York Times reported.

The market carnage comes after Standard & Poor's cut its rating for U.S. long-term sovereign debt from AAA to AA+ on Friday evening, blaming Washington's inability to manage its deficits.

(Earlier on GlobalPost: Wall Street collapse – Time to face the ugly truth about the US economy)

Asia-Pacific leaders tried to separate their economies from the ills afflicting the United States and Europe, but the markets weren't listening.

There are also concerns about the health of China's economy, especially Chinese listed banks that have been popular with foreign investors, Forbes said. Financial and banking companies were hit hard on the Hang Seng.