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North American stocks took a beating Monday over fears about government debt issues in the U.S. and overseas, with the Dow Jones plunging more than 600 points on one of the worst days in its history.

The Dow Jones industrial average plunged 634.76 points, or 5.5 per cent, to close at 10,809.85, while the Nasdaq composite index fell 174.72 points to 2,357.69. The S&P 500 index closed down 79.92 points, or 6.66 per cent, to 1,119.46, in its worst single day of trading since December 2008.

At the close of the trading day, the S&P/TSX composite index had fallen 491.75 points, following a net loss of nearly 800 points the week before. The Canadian dollar fell more than a cent to 100.92 cents US, just above par.

Amid the volatility in the markets, U.S. President Barack Obama held a hastily arranged news conference to try to allay investors' fears.

"There will always be economic factors that we can't control: earthquakes, spikes in oil prices, slowdowns in other parts other world," Obama said around 2 p.m. ET. "But how we respond to those tests, that's entirely up to us. Markets will rise and fall, but this is the United States of America, and no matter what some agency may say, we've always been and always will be a AAA country."

Obama's reference to his nation's former credit rating was a shot at credit rating agency Standard and Poor's and its decision to downgrade the U.S. debt rating on Friday from its highest rating, AAA, to AA+, a notch below. It was the first such downgrade the U.S. has received since the agency began evaluating the nation's debt nearly a century ago.

Obama acknowledged the seriousness of the country's growing debt and deficit problems. However, he said, Congress must also get to work on specific reforms that will create jobs and boost the economic recovery.

Obama called on lawmakers to extend a payroll tax cut into next years, "so workers have more money in their pay cheques next year, and businesses have more customers." He also called for an extension of employment insurance benefits, and repeated calls for a rollback of tax breaks for the wealthiest Americans.

"These aren't democratic proposals, these aren't big government proposals," Obama said. "These are all ideas that traditionally Republicans have agreed to countless times in the past. There's no reason why we shouldn't act on them now. None."

Despite Obama's reassuring tone, the losses seen in Toronto and New York on Monday imitated markets around the world, as investors ditched stocks and sought safe havens for their money.

In Europe, Britain's FTSE 100 fell 2.7 per cent during Monday trading, in which losses increased throughout the day, while the CAC-40 in France was down 3.6 per cent and Germany's DAX dropped 4 per cent. The Athens Stock Exchange hit is lowest pointing 14 years, losing six per cent of its value.

Asian markets also saw notable losses on Monday: Japan's Nikkei was down 2.2 per cent at the end of the day, Hong Kong's Hang Seng fell at a similar rate and South Korea's Kospi decreased by 3.8 per cent, as was the main exchange in China.

Amid the chaotic day in the markets, finance ministers and central bank governors from G20 countries issued a group statement Monday saying they were committed "to take all necessary initiatives in a co-ordinated way to support financial stability and to foster stronger economic growth."

With worldwide investors pulling out of stocks, they were diving into U.S. Treasuries and precious metals, including gold, which for the first time crossed the threshold of more than $1,700 per ounce on Monday. The December bullion contract on the New York Mercantile Exchange was up $61.40 to close at a record high of $1,713,20.

Gary Schlossberg, a senior economist with Wells Capital Management, suggested that investors seeking safe havens still had the financial crisis in the back of their minds as they made trades on Monday.

"Fear of a repeat of 2008 is what's really driving investments," Schlossberg told The Associated Press.

The price of oil continued its months-long plummet on Monday, dropping to US$81.31 a barrel, well below the much-higher price of nearly $115 that crude sat at only three months ago.

Debt concerns draining markets

Financial experts said the stinging losses taking place in the markets Monday had been triggered by investor fears about debt problems in the U.S. and Europe.

"Markets are deeply concerned about the ongoing financial problems in Europe, they're deeply worried about the ability of the U.S. government to deal with its fiscal situation," said Craig Alexander, the senior-vice president and chief economist of TD Bank Financial Group, when speaking to CTV's Canada AM on Monday morning.

"You know, S&P really just confirmed what markets were already telling us last week, which was that there was a crisis of confidence in the ability of politicians to deal with these fiscal issues."

David Beers, an S&P managing director, said Monday that it is possible for the U.S. to regain its prior credit standing, provided that its lawmakers can work together and get the U.S. on more solid financial footing.

"This is not a catastrophic decline in the U.S.'s credit-worthiness," Beers said during a television interview with ABC's "Good Morning America" on Monday.

Meanwhile, the European Central Bank bought Spanish and Italian bonds Monday in attempt to put a lid on soaring interest rates and prevent those countries from falling into default.

Market analyst David Buik of BGC Partners said that while the ECB may be making moves to stave off immediate problems, they are not making any headway on the bigger issues that will not go away on their own.

"The long-term problem is that we are both as a consumer in Europe, and also as most governments in Europe, hopelessly over-borrowed," Buik told Â鶹ӰÊÓ Channel from Paris on Monday.

With files from The Associated Press and The Canadian Press