PARIS — World stock markets swooned again Tuesday as the global financial crisis caused investors to worry that asset prices have yet to hit rock bottom.

In midafternoon trading, France's benchmark CAC-40 index and Germany's DAX 30 index of blue chips were both down 2 percent, and the FTSE-100 share index was 3.71 percent lower in London.

Investors' attention was now focused on the Federal Reserve, whose governors were to meet Tuesday for a decision on whether to cut a key interest rate — a possibility that would be a significant change from just a few days ago, when the widely accepted view was that the Fed was finished cutting interest rates and the next move would be to start raising them, though probably not until next year.

"Given the meltdown in markets, a rate cut is becoming fairly possible," said David Wyss, chief economist at Standard & Poor's in New York, in a comment echoed by other economists.

Financial stocks across Europe took a pounding for the second day running as the bankruptcy filing Monday of U.S. investment bank Lehman Brothers Holdings Inc. and the credit downgrades of American International Group Inc., the world's largest insurer, stoked investor fears of wider financial and economic damage.

"My guess is that we haven't seen the bottom," said Tony Dolphin, director of economics and asset allocation at Henderson Global Investors in London. The markets "don't feel as panicky as yesterday," Dolphin said, but concerns remain about the crisis extending its reach from the financial sector to the wider economy.

U.S. stocks extended their decline and bond prices jumped. The Dow Jones industrial average traded in a wide range, at times dropping more than 100 points after a 500-point slide on Monday.

AIG fell 66 cents — or 14 percent — to $4.10 after plunging nearly 75 percent in earlier trading, while European insurers Axa and Allianz fell 3.7 percent and 6.4 percent respectively.

Earlier, Asian stock markets plummeted, catching up with other markets around the world after a holiday Monday kept Tokyo and Hong Kong bourses closed.

Tokyo's Nikkei 225 index sank nearly 5 percent to 11,609.72, its lowest close since July 2005. Hong Kong's blue-chip Hang Seng Index shed 5.4 percent to its lowest point in nearly two years.

"Today was a bloodbath," said Alex Tang, head of research at Core Pacific-Yamaichi, who noted that Hong Kong trading volume was its highest in months. "This was panic selling ... They are dumping shares, they just want to liquidate their positions."

In France, banks and insurers posted some of the steepest stock losses. Investment bank Natixis lost 17.1 percent and Credit Agricole was down 5.8 percent, while BNP Paribas was 2.8 percent lower.

Natixis, Axa and Dexia all released statements detailing their exposures to Lehman Brothers. Natixis' exposure was limited, and Axa described its exposure as "nonmaterial." Dexia meanwhile said its total unsecured direct long-term bond credit exposure was 500 million euros ($713 million).

The situation was similar in Germany, where Commerzbank fell nearly 17 percent and Deutsche Postbank dropped 10.6 percent.

The Austrian stock market temporarily dropped to below 3,000 points for the first time since July 2005. Around 3 p.m. (1300GMT) local time, the ATX lost roughly 6.4 percent and fell to 2,996.22.

It had recovered slightly to just above 3,000 points — or a loss of about 5 percent — by 3:45 p.m. (1345 GMT).

Oil and gas giant OMV was among those most hard hit during Tuesday's session.

European central banks pumped billions more in short-term credit into the financial system for a second day to shore up confidence in the aftermath of Lehman Brothers' bankruptcy. The storied, 158-year-old Wall Street firm — once America's fourth-largest investment bank — was unable to secure an investment partner despite a flurry of last-minute negotiations over the weekend.

The European Central Bank, which oversees monetary policy among the 15 countries that use the euro, injected 70 billion euros ($99.06 billion) to money markets on Tuesday, after adding 30 billion euros ($42.5 billion) on Monday.

In London, the Bank of England provided another 20 billion pounds ($35.6 billion) in money to markets, four times the amount it pumped in on Monday.

The Federal Reserve pumped $50 billion into the U.S. financial system to help ease credit stresses, in addition to the regular market operations to inject $20 billion into the system slated for the day.

Markets were down sharply in Russia. The MICEX exchange, where most trading takes place, plunged by more than 17 percent to close at 881.17, while the RTS index retreated by 11.5 percent to 1131.12 points. Since its May high, the RTS has lost nearly half of its value.

The events of last few days, with Merrill Lynch & Co.'s sale to Bank of America Corp. will have two macroeconomic effects, Dolphin said. "It will extend the credit crunch, and maybe more importantly, it's another blow for business confidence," Dolphin said.

To ensure banks had enough cash, Japan's central bank on Tuesday injected of 2.5 trillion yen ($24 billion) into money markets and vowed to take other measures to maintain stability in the country's financial markets.

Despite a flurry of last-minute negotiations over the weekend, Lehman Brothers, with $60 billion in soured real-estate holdings, was unable to find an investment partner to throw it a lifeline. Investors were further shaken by equally stunning news that Merrill Lynch, one of the world's most famous brokerages, sought to avoid a similar fate with a $50 billion transaction to become part of Bank of America Corp.