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London - World and emerging stocks slid to their lowest since September 2009 and the euro and oil fell on Tuesday on worries over the eurozone banking sector and concerns over tensions on the Korean peninsula.
The central bank takeover of a small Spanish lender at the weekend reminded investors that the world is only just recovering from a banking crisis, following weeks of anxiety over how to stop a debt crisis begun in Greece from deepening.
The bailout was likely just the first of several rescues of small lenders, but analysts in Spain underline these have long been planned and are part of efforts to rationalise the sector rather than a threat to the stability of its financial system.
Markets, however, remain in generally nervous form.
"Spanish banking fears certainly exacerbate contagion risks," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
Across the globe, North Korean leader Kim Jong-il has told his military the country may have to go to war if the South attacks, with angry rhetoric on both sides having stepped up in recent weeks.
Global stocks as measured by MSCI fell 1.6% to their lowest since early September 2009, while the more volatile emerging index dropped more than 3% to eight-and-a-half month lows.
By 11:00, the JSE's All-share index was down more than 2.6%, while Russian shares fell 3.5%. Stock markets in China and India were down almost 2% each.
The rand has also extended its losses against the dollar on Tuesday.
The local currency traded at R7.98 against the greenback, after sinking to R7.9990 earlier from Monday's close in New York at R7.88/dollar. However, it strengthened more than 2% against the euro to R9.72. It was 0.3% stronger against the pound (R11.40).
Local government bonds slipped from their levels in the previous session, weakening in line with the rand and ahead of a government bond auction and first quarter economic growth numbers at 11:30.
"The rand has weakened on the back of risk aversion again as we see these global equity markets track weaker," a trader in Johannesburg said.
"If we see a recovery we will see a bit of rand strength as a they [markets] are driven by sentiment at the moment."
Holidays in many European countries on Monday delayed the sharp sell-off into Tuesday's trade.
The euro lost nearly 1% against the dollar to $1.2230 and sterling, the currency of another highly-indebted European country, fell 1% against the dollar to $1.4278.
- Reuters, AFP and I-Net Bridge
