TOKYO (AP) - Asian and European stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

India's benchmark stock index tumbled 7.4%, while Hong Kong's blue-chip Hang Seng index plummeted 5.5% to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Investors dumped shares because they were skeptical that an economic stimulus plan U.S. President George W. Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about US$145 billion (euro99 billion) worth of tax relief to encourage consumer spending.

Concerns about the outlook for the U.S. economy, a major export market for Asian companies, has sent the region's markets sliding in 2008. Just last Wednesday, the Hang Seng index sank 5.4%.

"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."

Japan's benchmark Nikkei 225 index slid 3.9% to close at 13,325.94 points, its lowest close in more than 2 years. China's Shanghai Composite index plunged 5.1%, partly on worries about mainland Chinese banks' exposure to risky U.S. mortgage investments.

The sell-off continued in Europe. Germany's DAX was down 6% in morning trading, France's CAC 40 slid 6.1%, while Britain's FTSE 100 dropped 5.1%.

"People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world," said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

"Maybe there's still some wariness about politicians are able to come up with a compromise and act sufficiently quickly" on a stimulus package, Cohen said. "I think the impact would be marginal anyway."

Investors took cues from the negative reaction to the president's plan on Wall Street on Friday, when the Dow Jones industrial average slid 0.5% to 12,099.30, bringing its loss for the year so far to nearly 9%.

Traders also have shrugged assurances from Federal Reserve Chairman Ben Bernanke that the U.S. central bank is ready to act aggressively -- which means a likely big interest rate cut later this month -- to help the sagging economy.

Some analysts predict that Asia won't suffer dramatically from a U.S. recession because increased trade and investment within Asia has made the region less reliant on the United States than in the past. Excluding Japan, 43% of Asia's exports go to other nations in the region, Lehman Brothers calculates, up from 37% in 1995.

But on Monday, uncertainty and pessimism reigned.

In Tokyo trading, exporters got hit hard, partly because of the yen's recent strength against the dollar. Toyota Motor Corp. lost 3.3% and Honda Motor Co. sank 3.4%.

Shares of Bank of China dropped 6.4% in Hong Kong after the South China Morning Post newspaper reported that the bank is expected to announce a "significant writedown" in U.S. subprime mortgage securities, citing unidentified sources. In Shanghai, the bank's stock declined 4.1%.

India's the benchmark Sensex index fell 1,353 points, or 7.4% -- its second-biggest percentage drop ever -- to 17,605.35 points. At one point, it was down nearly 11%.

The decline hit companies across the board, with power utility Reliance Energy Ltd. falling 16.4%. Major software company Tata Consultancy Services Ltd. slid 7.6%.

"A gloomy U.S. climate has affected the global markets. Even if those markets recover, it will take sometime for the recovery to reach India because today's fall has been so drastic," said Jayant Pai, of the Mumbai investment company IL&FS Ltd.

Still, Pai and others suggested that the declines could lead to a buying opportunity.

"The sell-off today takes us close to the bottom," she said.

Since the start of the year, Japan's Nikkei index has declined 13%, while Hong Kong's blue-chip index is down more than 14%. Even China's Shanghai index -- which nearly doubled last year -- has fallen 6.6% over the same period and nearly 20% from its all-time closing high on Oct. 16.