LONDON (AFP) - World equities plunged Monday and gold topped $1,700 for the first time, as investors eyed the prospect of a sharp global downturn and shrugged off international efforts to resolve sovereign debt woes. Frankfurt and Paris stocks fell by more than 4.0 percent in afternoon trading on Monday, and London dived by more than 3.0 percent, following heavy US losses as Wall Street reacted to Washington's loss of the top AAA credit rating. Markets also fretted about the exposure of the global banking sector to the eurozone debt crisis, despite G7 and G20 pledges to bolster the global economy and European Central Bank action on eurozone debt, dealers said. "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 told AFP. "The global financial and economic situation is looking bleak and policymakers are running out of ammunition. Difficult times lie ahead," said MacKinnon, noting that traders were seeking to exit risky equities and preserve their cash. He added: "In the eurozone, there are worries about some major banks may be in trouble." European stock markets had enjoyed brief gains in early morning deals but soon dived back into negative territory, while Asian equities finished lower. In late afternoon trade, London's FTSE 100 index slid 3.0 percent at 5,089.55 points, the Paris CAC 40 shed 3.72 percent to 3,156.51 points and Frankfurt's DAX index was down 4.31 percent at 5,969.14. Madrid meanwhile sank 1.59 percent and Milan shed 2.15 percent, reversing their earlier gains made after the European Central Bank (ECB) said it was ready to buy eurozone bonds and their governments promised to slash deficits. "That Was The Relief Rally That Was -- and quite frankly I am not surprised," said analyst Howard Wheeldon at London-based brokerage BGC Partners. "It seems that no matter how the politicians try, markets are in no mood to be taken in. This is a mess and I don't see it getting better any time soon. "There are so many issues that have all combined at one single point be they from the United States or Europe there can in my view be no justification for a rally yet." Across in New York, the Dow Jones Industrial Average was down 3.0 percent to 11,098.17 after about one hour of trading. The British market had dived almost 10 percent last week on fears of another vicious global downturn, wiping around 150 billion in value from the FTSE 100. As nervous markets re-opened on Monday, financial chiefs and central bankers of the G7 nations, which include Germany and the United States, pledged to "take all necessary measures to support financial stability and growth." The G20 of top industrialised and emerging economies made a similar pledge. But Asian stocks tumbled on Monday as traders focused on last week's historic downgrade of the United States' credit rating, which compounded concerns over the world's biggest economy as well as the global outlook. Tokyo closed down 2.18 percent, Hong Kong tumbled 2.11 percent, Seoul sank 3.82 percent and Sydney shed 2.91 percent. The stock market falls were echoed by big losses in oil futures while safe-haven gold surged to a record $1,715.75 per ounce. On Friday, the United States had its top-notch AAA credit rating downgraded for the first time, when Standard & Poor's cut it to AA+ with a negative outlook on debt concerns. In Monday afternoon deals, the European single currency sank to $1.4225 from $1.4282 on Friday. With concern running high that eurozone debt could plunge the world into a new financial crisis, the European Central Bank promised to make major purchases of eurozone government bonds. The ECB said it would resume bond purchases after Italy and Spain had announced new measures to control their finances and boost their economies, and France and Germany pushed for full and rapid implementation of a plan to avoid future crises. "Following commitments from the Italian and Spanish governments to fully implement their fiscal reforms, the ECB announced its decision to 'actively implement its Securities Market Programme'; although not explicit in the statement, we take this to imply the purchase of Italian and Spanish sovereign bonds," said Investec economist Victoria Cadman. "ECB intervention this morning has been taken as a positive move with Italian and Spanish 10-year bond yields having seen a sharp drop now standing around 5.3 percent and 5.2 percent, compared to levels above 6 percent last week." However, Cadman also warned: "To our minds, the eurozone crisis has the potential to deepen further.