Asian and European markets are lower Tuesday as investors react to an unprecedented downgrade of the U.S. government's credit rating and lingering concerns about European debt problems and global economic growth.

Japan's Nikkei index closed 1.68 percent lower Tuesday, recovering from a more than 4 percent drop earlier in the session. Analysts said some buyers came in looking for bargains. Hong Kong's Hang Seng index closed down 5.66 percent, while Seoul's KOSPI index hit its lowest point in more than a year.

European markets are tumbling again after a brief up-tick at opening. U.S. market futures are alternating between up and down as investors wait to see what, if any, action the U.S. central bank will take after it holds a regularly scheduled one-day meeting in Washington Tuesday.

On Wall Street Monday, the index that measures broad U.S. stock market activity, the S&P 500, was down almost 7 percent. It was the biggest drop since December 2008. Major indexes across Europe were down by 3 to 5 percent.

Monday's trading sessions were the first chance for most investors to react to the change in the Standard & Poor's rating, which was announced Friday evening after world markets had closed. U.S. government debt is now rated “AA+,” one level below the highest possible rating of “AAA.”

However, investors continued to buy U.S. Treasuries, seeking the safety of government debt amid stock market volatility. That effectively lowers the price the government must pay to borrow money.

Gold is also at record highs, but the prices of most other commodities, including oil, fell as investors appeared to be bracing for an economic slowdown or even a possible return to recession.

U.S. President Barack Obama said he disagrees with the S&P downgrade, but that he hopes it will prompt lawmakers in Washington to agree on what he called a balanced approach to debt and deficit reduction – including higher taxes for the wealthy and cuts in spending on social programs. Republicans immediately rejected the idea of tax increases.

S&P Monday defended its decision, saying increasing debt levels in the United States and the inability of Congress and the president to reach political consensus for significant deficit reductions were “no longer comparable with the most highly rated governments.”

The other two major credit rating agencies – Moody's and Fitch – have so far kept the U.S. at the highest AAA rating.