North American markets look set to tumble again Monday following Sunday’s bargain-basement sale of Bear Stearns and a move by the U.S. Federal Reserve to ease emergency loans.

The Fed cut its discount rate Sunday by a quarter-point to 3.25%, and also relaxed the terms and expanded the collateral it accepts from banks taking urgent loans.

Sunday’s action by the Fed comes ahead of Tuesday’s monetary policy meeting at which the Fed now is widely expected to cut the federal funds rate by a full percentage point.

Also Sunday, J.P. Morgan Chase & Co. agreed to buy Bear Stearns Cos. for just US$236.2 million, or US$2 a share.

Overseas, Asian and European stocks plunged as the Bear Stearns collapse stoked fears about other financial institutions exposed to troubled credit markets.

Japan’s Nikkei stock average closed with a loss of 3.7% to 11,787.51, its lowest level in more than 2½ years, while Hong Kong’s Hang Seng index tumbled 5.2%.

The FTSE 100 index was down 2.4% near midday in London, while the German DAX fell 3.2% and the Paris CAC 40 fell 2.8%.

Gold and crude prices rose, with crude jumping to a record US$111.80 a barrel in Asia.

Gold hit a new high of US$1,033.90 an ounce overnight, trading later at US$1,025.00, up US$25.50.

The Canadian dollar opened at US101.12¢, down 0.28 cent from Friday.

Stock markets tumbled Friday as news that investment banking giant Bear Stearns Cos. Inc. will take an emergency funding bailout from J.P. Morgan and the U.S. Federal Reserve revived fears of a credit crunch.

The S&P/TSX composite index shed 190.66 points, or 1.42%, to close at 13,252.84. The financials group sank 2.92%. The junior S&P/TSX Venture composite index fell 38.63 points, or 1.44%, to finish at 2,642.04.

In New York, the Bear Stearns rescue mission sparked a sell-off in the financial sector and markets suffered. Bear Stearns shares fell more than 40% in afternoon trading.

The Dow Jones industrial average lost 194.65 points, or 1.60%, to end at 11,951.09. The S&P 500 lost 27.34 points, or 2.08%, to close at 1,288.14.

As well, the tech-heavy Nasdaq closed down 51.12 points, or 2.26%, at 2,212.49.

For the week, though, the Dow managed to finish with a gain of 0.5%, while the S&P 500 fell 0.4% and the Nasdaq was unchanged.