Stocks plummeted around the world as Standard & Poor's unprecedented downgrade of the United States sent shockwaves through markets already roiled by Europe's debt crisis. As gold topped $1,700 an ounce for the first time in history and crude oil prices fell, Asian stocks tumbled despite G7 and G20 pledges to bolster the global economy and European Central Bank action on eurozone debt. In Japan, the benchmark Nikkei-225 index of the Tokyo Stock Exchange fell 4.07 percent, or 370.58 points, to 8,726.98 in midmorning trade Tuesday, adding to a 2.18 percent plunge on Monday. South Korean shares also shot lower, dropping more than five percent, with the benchmark Kospi index down at 1,775.78. On Wall Street, the Dow Jones Industrial Average fell 634.76 points on Monday -- its steepest one-day drop since late 2008 -- to close at 10,809.85, erasing all of its gains since last October. The broader S&P 500 fell 6.7 percent to 1,119.46 while the tech-heavy Nasdaq dropped 6.9 percent to 2,357.69. The Standard & Poor's ratings agency lowered the US long-term sovereign debt rating from AAA to AA+ after markets closed Friday, citing Washington's inability to rein in its mounting deficits. US President Barack Obama sought to contain the damage, giving a televised speech on Monday to declare that the United States "always will be a triple-A country", but markets only hit fresh lows afterwards. "'Downgrade' was the word of the day on Wall Street today, as investors reacted to Standard & Poor's late-Friday revision to the US credit rating," said Andrea Kramer, an analyst with Schaeffer's Investment Research. Financial stocks were battered, with Citigroup falling 16.4 percent. Bank of America dived an eye-popping 20.3 percent after it was also hit with a mammoth $10.5-billion fraud lawsuit from insurance giant AIG. Traders worried that the S&P downgrade would impact the bond markets, but instead Treasury prices rallied strongly. The yield on the 10-year Treasury fell to 2.34 percent from 2.56 percent late Friday, while 30-year bonds dropped to 3.66 percent from 3.82 percent. Bond prices and yields move in opposite directions. Gold, seen as a safe-haven asset in times of financial turmoil, soared to $1,717.32 per troy ounce at 2130 GMT on the New York spot market, after earlier hitting a new intraday record of $1,720.82. The price of oil fell by more than five percent in both New York and London as the growing risk of a new economic downturn threatened to eat away at global energy demand. In Europe, stock markets fell despite signals from the European Central Bank that it would buy Italian and Spanish bonds in a bid to prop up the two countries' troubled finances. Frankfurt closed down by more than 5.0 percent, Paris was down by 4.7 percent and London dived by nearly 3.4 percent. "Investors are worried about the rising risk of global recession, the threat of a major bank bust and a growing loss of confidence in EU policymakers to properly resolve the eurozone debt and banking crisis," VTB Capital economist Neil MacKinnon said. "The global financial and economic situation is looking bleak and policymakers are running out of ammunition. Difficult times lie ahead." In the foreign exchange market, the dollar rose against the euro despite the Standard & Poor's downgrade. Analysts said the greenback was benefiting from inflows into US bonds amid jitters over Italian and Spanish debt. The dollar was trading for $1.4179 against the euro at 2100 GMT on Monday, compared to $1.4281 at the same time Friday. "While the lasting ramifications of the downgrade are difficult to know at this early stage, the initial impact on the bond and currency markets has not been too severe," said Nick Bennenbroek, a forex analyst for Wells Fargo. The dollar lost ground against the Japanese yen, trading for 77.68 yen, down from 78.54 late on Friday. It weakened against the Swiss franc, dropping to 0.7546 francs from 0.7673. The dollar gained against the British pound, trading for $1.6318 against the pound on Monday, compared to $1.6393 on Friday.