NEW YORK (CNNMoney) -- European stocks were getting slammed Monday, after Moody's Investors Service issued a dire warning on French bonds, and Asian markets were dampened by pessimistic remarks made by a high-ranking Chinese official.
London's FTSE () ended the day down 2.6%, while the CAC 40 ( ) in Paris and the DAX ( ) in Frankfurt plunged more than 3.4%.
French bond yields have been on the rise, along with Italian and Spanish bonds -- raising some red flags for Moody's.
Moody's report on Monday focused on the wide spread between French and German 10-year bond yields, the latter considered to be the gold standard of stability in the European bond market.
"Last week, the difference in yield between French and German 10-year government bonds breached 200 basis points, a euro-era record amid increased economic and financial market uncertainty in the region," wrote Alexander Kockerbeck, senior credit officer for Moody's in Frankfurt.
On Monday, Germany's bond yield dipped to 1.89%, as French bond yields ticked up to 3.47%. The trading session has helped narrow the spread to 158 basis points -- for now. But Kockerbeck said he's still concerned about long-term funding.
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"Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," said Kockerbeck.
Banks bore the brunt of the sell off. In Germany, shares of Deutsche Bank () tumbled more than 4%. On the CAC 40: Credit Agricole fell 4%, while BNP Paribas ( ) and Societe Generale ( ) plunged more than 4% each.
Meanwhile, a report from Fitch Ratings said the eurozone crisis could spread to European nations, if banks are forced to cut funding to their branches in the central and eastern part of the continent.
The International Monetary Fund said Monday that it has received a request from Hungary for possible financial aid and that the country has made a similar request to the European Commission. The IMF said the requests are "precautionary."
It's not the first time Hungary has gone down this road. Back in 2008, the country received $25 billion in aid from the IMF and European Union.
The European Central Bank has continued to buy sovereign bonds to help support the debt-ridden markets. In its most recent weekly announcement, the ECB said Monday that it bought nearly €8 billion worth of bonds in the week ended Nov. 16, though it does not identify the countries that issued them.
Asian markets weren't faring much better. Tokyo's Nikkei () edged down 0.3%, the Hang Seng ( ) in Hong Kong dropped 1.4% and the Shanghai Composite ( ) closed little changed.
Deutsche Bank analysts Jim Reid and Colin Tan said this is partly the fault of partisan politics in Congress, with the Asian markets "reacting to the budget impasse in the U.S."
A senior Chinese official didn't help matters when he announced his gloomy assessment of the economy.
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"China's Vice Premier Wang Qishan said that the current economic situation is extremely serious and is certain that a global recession triggered by the international crisis will last a long time," wrote the Deutsche Bank analysts in a report to investors.
The contagion spread to Wall Street. The Dow Jones industrial average (), the Nasdaq 100 ( ) and the S&P 500 ( ) all fell more than 2% in midday trading.
Bank stocks were particularly hard-hit, with Citigroup (, Fortune 500) dropping 5%, JPMorgan Chase ( , Fortune 500) falling 2% and Bank of America ( , Fortune 500) losing more than 3%.