Markets fall as fears grow over bailout plan

• Story Highlights
• European and Asia markets down in Tuesday trading
  
• In Hong Kong, the Hang Seng index closed down 3.4 percent
  
• Investors are worried about a $700 billion U.S. bailout plan and rising oil prices
  
• Senate Banking Committee to hold a hearing on the bailout proposal Tuesday

(CNN) -- Markets in Europe and Asia tumbled on Tuesday as uncertainty grew in the U.S. over a $700 billion financial rescue plan.

In Europe, London's FTSE index fell 1.79 percent as trading edged towards close, the Paris CAC 40 was down 1.69 percent, while Frankfurt's DAX fell by just over half a percent.

In Asia, Hong Kong shares led the region's declines, with the blue-chip Hang Seng Index losing 3.9 percent to 18,872.85 points after two sessions of solid gains.

In China, the benchmark Shanghai Composite Index declined 1.56 percent to 2,201.51. Benchmarks in Australia and Singapore also were down sharply.

The falls follow losses Monday on Wall Street. The Dow slid 373 points -- 3.3 percent -- as investors worried about the bailout plan and oil prices.

Crude prices dropped below $108 a barrel Tuesday in Asian trading, a day after volatile trading saw prices spike by $25 at one point.

On Monday, U.S. President George W. Bush urged Congress to put his financial rescue plan into action, without adding "unrelated provisions" or "provisions that would undermine the effectiveness of the plan."

Bush's economic team sent Congress the rescue package over the weekend, after a crisis in the markets led to the collapse of Lehman Brothers, a Bank of America buyout of Merrill Lynch, and the government rescue of AIG, the biggest insurance company in the U.S.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the architects of the bailout, are expected to face tough questions at a hearing Tuesday from lawmakers in both parties about the cost, how the rescue would work and how taxpayers would be affected.

Paulson was in talks with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

The administration is balking at another key Democratic demand: Allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.

Analysts say the proposals being debated are the centerpiece of what would be the most sweeping economic intervention by the government since the Great Depression.

Meanwhile, French President Nicolas Sarkozy is calling for those responsible for the crisis to be punished.

In a speech in New York on Monday night he said: "Today millions of people around the world are fearful of losing their nest eggs, their apartments, their savings in banks.

"We must provide them with clear answers. Who is responsible for this disaster. That those responsible will be held accountable and punished and that we government leaders will assume our responsibilities.

"If we don't speak clearly, we won't create a stable world," Sarkozy said at a dinner where he was awarded the Elie Wiesel Foundation's Humanitarian Award.