Asian stocks tumbled on Monday after last week's historic downgrade of the United States' credit rating, which compounded concerns over the world's biggest economy as well as the global outlook.

The falls were echoed by big losses in oil while gold surged to a new record above $1,700 as investors moved out of risky assets.

They also followed a huge sell-off on Friday caused by mounting problems in the eurozone amid growing expectations that Italy and Spain could need a bailout.

The combination of the eurozone debt problem and Standard & Poor's downgrade led to frantic talks between financial chiefs and central bankers of the G7 and European Central Bank at the weekend as they tried to prevent another day of market turmoil.

But it was not enough to prevent big falls in Asia.

Tokyo shed 2.18 percent, or 202.32 points, lower at 9,097.56, Seoul sank 3.82 percent, or 74.31 points, to 1,869.44 and Sydney fell 2.91 percent, or 119.3 points, to 3,986.1.

Taipei dived 3.82 percent, or 300.33 points, at 7,552.80.

Hong Kong fell 2.17 percent, or 455.57 points, to 20,490.57 and Shanghai lost 3.79 percent, or 99.60 points, to 2,526.82, its lowest level since July 19 last year.

Global markets dived Friday -- before the S&P announcement -- after a fresh batch of weak US economic data and a warning from the head of the European Commission that the eurozone crisis had likely spread to other economies.

"Like others, we had been concerned about the Lehman-like risks of a Greek default," Brown Brothers Harriman said in a note to clients Monday, referring to the Wall Street bank whose collapse in 2008 ushered in the financial crisis.

"Compound this with marked weakness of the US economy, a distracting debt ceiling debate, and now the downgrade and the worsening of the European debt crisis, and... by a number of metrics, financial conditions are the worst since the Lehman debacle," it added, according to Dow Jones Newswires.

However, IG Markets analyst Ben Potter said he expected shares to stage a recovery from the devastation at the back end of last week which saw the Dow Jones suffer its biggest fall since 2008.

"We feel there is a reasonable chance for some buying interest as the market begins to realise that it has overreacted to the downside," he said.

"No one really fully understands the full implications of this credit downgrade, which is why we have seen the market sold off hard. It's a classic case of sell first, ask questions later."

S&P on Friday cut the US debt rating to AA+ with a negative outlook from the top-notch triple-A for the first time.

The decision sparked criticism from Washington, with Treasury Secretary Timothy Geithner saying the agency had shown "terrible judgement" and assuring investors US Treasuries were as safe as ever.

With fears meanwhile running high that eurozone debt could plunge the world into a new financial crisis, the European Central Bank promised to make major purchases of eurozone government bonds.

The ECB said it would renew bond purchases after Italy and Spain announced new measures and reforms to boost their economies and France and Germany pushed for full and rapid implementation of a plan to avoid future crises agreed at a summit last month.

In early European trade London's benchmark stocks index rose 0.56 percent, Paris jumped 0.75 percent while Frankfurt was flat, reversing initial falls and a slump for equities last week.

Fears of a global meltdown, which some see as potentially worse than the 2008 collapse, sent leaders into a flurry of phone calls between Berlin, London, Paris and Washington over the weekend to stem the tide.

Officials from G7 nations -- Britain, Canada, France, Germany, Italy, Japan and the United States -- pledged to "take all necessary measures to support financial stability and growth" as nervous global markets re-opened Monday.

"We are committed to taking coordinated action where needed, to ensuring liquidity, and to supporting financial market functioning, financial stability and economic growth," they said in a statement.

"We are committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth, and welcome the decisive actions taken in the US and Europe," it said.

The G7 and ECB moves were welcomed by IMF chief Christine Lagarde Sunday, who said they would "contribute to maintaining confidence and spurring global economic growth".

Despite the downgrade dealers seemed to be giving support to US Treasury bonds.

The 10-year Treasury yield increased to 2.579 percent, from 2.563 percent at Friday's New York close, while the yield on two-year Treasuries fell to 0.268 percent from 0.292 percent, contrary to some predictions of a much more aggressive initial market reaction.

Lower yields represent higher confidence.

The euro was trading at $1.4382 in Tokyo late trade, up from $1.4281 in New York late Friday, before the Standard & Poor's downgrade.

Against the yen the euro was at 111.91 from 111.01 in New York Friday, while the dollar slipped to 77.79 yen from 78.48 yen.

Gold ended at a record high $1,706.00-$1,707.00 an ounce in Hong Kong, well up from Friday's close of $1,655.50-$1,656.50, with investors piling into the safe-haven metal in times of economic uncertainty.

On oil markets New York's main contract light sweet crude for September delivery tumbled $2.99, or 3.44 percent, to $83.89 a barrel in the afternoon.

Brent North Sea crude for September sank $2.83, or 2.59 percent, to $106.54.

In other markets:

-- Singapore closed down 3.70 percent, or 110.78 points, to 2,884.00.

Singapore Telecommunications fell 3.60 percent to 2.95 and Keppel Land shed 5.63 percent to 3.35.

-- Manila fell 2.40 percent, or 106.31 points, to 4,331.24.

"This is not just a knee-jerk reaction. There is real concern that there is a structural problem in the United States," said Luz Lorenzo of ATR-Kim Eng Securities.

Exports, tourism, the remittances of Filipino overseas workers and even the booming business outsourcing sector like call centres, may all be affected if the downgrade results in a weaker US currency, she told AFP.

San Miguel Corp. saw its A shares fall 3.17 percent to 119.10 pesos while Alliance Global Group dropped 4.79 percent to 10.72 pesos.

-- Wellington closed 2.78 percent, or 91.06 points, off at 3,185.45.

Telecom Corp fell 3.3 percent to NZ$2.485, Fletcher Building slid 3.0 percent to NZ$7.48 and Contact Energy (CEN.NZ) was down 2.4 percent at NZ$4.91.

-- Jakarta fell 1.82 percent, or 71.37 points, to 3,850.26.

Car maker Astra lost 3.2 percent to 65,050 rupiah, Bank Mandiri tumbled 6.1 percent to 6,850 rupiah and Bank Rakyat fell 5.3 percent to 6,300 rupiah.

-- Kuala Lumpur ended down 1.80 percent, or 27.44 points, to close at 1,496.99.

Axiata Group shed 1.6 percent to 4.99 ringgit while Malayan Banking lost 1.6 percent to 8.63. CIMB Group added 0.1 percent to 8.30 ringgit while Nestle Malaysia gained 1.0 percent to 47.60.