Evidence of more pain inflicted by the global financial crisis on banks, manufacturers and whole economies dampened hopes for a speedy recovery and snapped a six-week global stocks rally.
Bank of America reported a jump in troubled loans, Germany probably sank deeper into recession and Japan's government is expected to acknowledge that its no-growth forecast for the current fiscal year was much too optimistic.
Australia's economy, too, looks to be contracting, with the central bank governor saying all information pointed to a first recession since 1991. On Monday, Prime Minister Kevin Rudd had acknowledged this was inevitable given the global downturn.
India, one of only a handful of major economies that have so far escaped recession, shaved a quarter point off its interest rates on Tuesday to shore up faltering growth and, with its benchmark now at 4.75 percent, still has scope to do more.
The euro area also has some limited room for lower rates, European Central Bank Governing Council member Christian Noyer said in a radio interview, while noting some economic indicators have become "less bad" in recent months. The Japanese finance ministry on Tuesday outlined its additional budget for the year to March 2010 that includes about $110 billion in new bonds to finance its more than $150 billion economic stimulus announced earlier this month.
Yet the Nikkei newspaper said the new official forecast will see the world's second-biggest economy shrinking by 3 percent amid the deepest and longest recession since the early 1970s.
The world's No.1 carmaker Toyota Motor Corp is poised to slash its global production by 12 percent to 6.2 million cars as it struggles with overcapacity, the Yomiuri newspaper reported, a move that could further hit a strained jobs market.
Trillions of dollars committed to stimulus packages, cautious optimism about corporate earnings and data suggesting the free-fall in global economic activity was slowing have spurred talk of "green shoots" of recovery and buoyed world stocks by nearly a third since early March.
An expected uptick in two German sentiment indicators is set to reflect hopes that the worst of the crisis might be over even as the Bundesbank warned that recession in Europe's biggest economy had "intensified further" in the last quarter.
The ZEW economic think-tank's monthly gauge, due at 0900 GMT on Tuesday, is expected to return to positive territory, while the Ifo institute's influential index is also seen edging up slightly when it is published on Friday.
But Bank of America's warnings drove home the message that improved results from several leading U.S. banks masked persistent underlying problems, raising questions about the sustainability of bank profits.
"We continue to face extremely difficult challenges, primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," BofA CEO Kenneth Lewis said.
The surge in BofA's bad loan provisions also reminded investors that the world economy still remained firmly in the grip of the worst downturn since the 1930s Great Depression.
IBM's quarterly results, showed how even one of the healthiest U.S. technology companies could not escape the downturn, with revenue falling by a bigger-than-expected 11 percent.
RENEWED WORRIES
BofA, the biggest U.S. bank, more than doubled its first-quarter profit, helped by its takeover of Merrill Lynch, but its shares tumbled 24 percent, dragging down world stocks and boosting safe-haven bonds as investors spurned riskier assets.
Asian stocks fell more than 2 percent on Tuesday, tracking losses in U.S. and European shares, and European markets were expected to trade lower again.
"Losses overnight in Wall Street stocks and renewed concerns about the health of U.S. banks are weighing on sentiment today," said Kim Yong-kyun, an analyst at Daishin Securities in South Korea. In yet another sign of the crisis spreading around the globe, Colombia asked the International Monetary Fund for a $10.4 billion credit line, joining a lengthening queue of nations seeking the lender's help.
The ballooning costs of IMF-engineered bailouts prompted a pledge from the Group of 20 of the world's biggest economies to triple the Fund's resources to $750 billion. Following up on that pledge, U.S. President Barack Obama proposed a $100 billion loan to the IMF ahead of IMF and World Bank meetings in Washington on Friday and Saturday.
