A trader gestures on the trading floor of the Philippine Stock Exchange, which closed down 2.6 per cent in trading Monday, in Manila's Makati financial district. ((Cheryl Ravelo/Reuters))

Asian and European markets dropped Monday amid fears that government bank bailouts in the U.S. and Europe will not be enough to stop the U.S. economic crisis from spreading around the world.

The drops erased an estimated $2 trillion of value.

Investors said they are skeptical of the $700-billion bailout plan passed by Washington on Friday and are concerned about a U.S. jobs report that suggested the U.S. could be headed for a recession.

They said they wonder about the impact of the package and how long it will take to thaw credit markets, restore bank lending and provide stability to the U.S. economy.

"There are strong doubts about its implementation," Yukio Takahashi at Shinko Securities Co. said in Tokyo.

The drop in markets comes a day after Germany announced on Sunday that it will spend $69 billion US (€50 billion) to bail out Hypo Real Estate AG, the country's second most important commercial property lender.

Germany announced earlier that it would join Ireland and Greece in guaranteeing all private bank accounts. Chancellor Angela Merkel said that no citizen should fear for the safety of their investments. The move was the latest by European governments to save failing banks.

Britain's benchmark stock index, the FTSE 100, lost 391.06 to 4,589.19 — a 7.85 per cent fall. The banking industry led the declines, with the mining and oil industries also suffering drops. HBOS PLC's share price tumbled 15.7 per cent, while the Royal Bank of Scotland Group PLC dropped 13.6 per cent.

Germany's DAX index edged down 7.07 per cent to 5,387.01. France's CAC-40 index fell 9.04 per cent to 3,711.98.

In Russia, the RTS stock index fell 19 per cent to 866.39, mainly on plunging oil value. On Monday, crude prices slipped below the $90 US a barrel mark on the New York futures market for the first time since February, hurting the economic prospects for countries, such as Russia, that are oil exporters.

In Asia, the markets were in the red. Tokyo's Nikkei 225 index dropped to its lowest level in four and a half years, plunging 4.25 per cent to 10,473.09.

Hong Kong's Hang Seng index edged down five per cent to 16,803.76. Markets in China, Australia, South Korea, India, Singapore and Thailand dropped significantly as well. Indonesia's key index fell 10 per cent, its largest one-day drop ever.

"This credit crunch looks like it's not going away any time soon," Alex Tang, head of research at brokerage Core Pacific-Yamaichi said in Hong Kong.

"Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the U.S. economy."

The U.S. Labour Department reported Friday that 159,000 jobs in the U.S. were lost in September. It was reportedly the largest one-month loss in more than five years.

"Everyone is losing confidence," said Mark Tan, who helps manage about $20 billion of equities and bonds at UOB Asset Management in Singapore.

"The problem now is that the lack of foreign confidence could affect the Asian consumer, which would lead to a bigger slowdown in Asia than expected."

With files from the Associated Press