European stocks sank on Monday on fears over the health of Swiss bank Credit Suisse, while oil jumped on expectations of an OPEC output cut.
Investors are already on edge over worries that rising interest rates, aimed at fighting sky-high inflation, could spark recessions.
The British pound bounced above $1.12 after the UK scrapped plans to axe its top income tax rate, after a debt-fuelled budget had sent sterling spiralling to a record dollar low one week ago.
'Dicey' sentiment
"Sentiment is still pretty dicey and Credit Suisse is definitely weighing heavily today on European equities," Markets.com analyst Neil Wilson told AFP.
"A globally systemic bank requiring to raise capital would be a major event and could certainly undermine confidence in the banking system."
Shares in Credit Suisse plunged to a new low in Zurich on Monday as the scandal-plagued lender sought to ease concerns about its financial health. Stocks tumbled almost 10 per cent to 3.58 Swiss francs ($3.61) before clawing back ground to 3.65 francs, down more than eight per cent.
The Financial Times reported that senior executives sought over the weekend to reassure big clients and investors about the bank's liquidity and capital position due to concerns raised about its financial strength.
"The sad reality is that if there is something wrong with Credit Suisse, then we have a major issue as this is a gigantic institute, and the domino effect will be unbearable," said AvaTrade analyst Naseem Aslam.
If there is something wrong with Credit Suisse, then we have a major issue as this is a gigantic institute, and the domino effect will be unbearable- AvaTrade analyst Naseem Aslam
Oil spikes before OPEC
Oil briefly leapt by more than four per cent as reports said OPEC and its allies are considering a major output cut to stem a price plunge caused by demand worries.
That stoked stubborn concerns about soaring inflation, which has been fuelled this year by sky-high energy prices after key producer Russia's invasion of Ukraine.
"The rumours of a potential OPEC production cut won't do anything to calm worries about inflation and a recession," said IG analyst Chris Beauchamp.
The 13 members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their 10 partners led by Moscow will physically meet on Wednesday for the first time since March 2020.
Sterling gains on U-turn
The pound rallied briefly after UK finance minister Kwasi Kwarteng made a major U-turn with the scrapping of a controversial plan to axe the top income tax rate.
The cut was part of a controversial mini-budget unveiled by Kwarteng 10 days ago, which had sent sterling spinning to a record low of $1.0350.
UK gilts, or government bonds, remain supported by an emergency Bank of England intervention after yields rocketed following the debt-fuelled budget late last month.
Asian equities mainly fell on Monday, with Hong Kong tumbling to its lowest point in more than a decade as fears for China's economy deepens this year's investor rout.
The Hang Seng Index shed 0.83 per cent, or 143.32 points, to close at 17,079.51.
But crucially it crossed below the 17,000 level in the afternoon, touching a nadir not seen since October 2011 and the aftermath of the global financial crash and during the eurozone debt crisis.