Europe is hot, if you don't look too far over your shoulder. The Dow Jones Stoxx 600 Index played well through the stock market recovery of 2009, ticking up 28% (60% from its March 2009 low). This was the index's best annual performance in a decade.

Basic resources and banks gained 100% and 46%, respectively, this year, after having turned in dismal performances the year before. China helped, as well, with its elevated economic growth forecast good for another 0.5% gain during the shortened week of Christmas.

The New York Times reports that global stock markets are tumbling. Nobody really knows why but the latest theory is that investors are concerned about the capital problems at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) about which I posted yesterday.

Here's a survey of some of the global market damage:

• Nikkei 225 stock average fell 2.5%
• The Hang Seng index in Hong Kong down 3.3%
• S&P/ASX 200 index in Sydney declined 1.4%
• In London morning trading, the FTSE 100 index was down 2.7%
• DJ Euro Stoxx 50 index, of euro zone blue chips, fell 2.3%
• DAX in Frankfurt fell 2.4%
• CAC 40 in Paris sank 2.4%

The selling in Europe continued before the markets staged a mild rebound -- which analysts attributed to short-covering and/or the U.S. Federal Reserve's action Tuesday morning to slash both the Federal Funds rate by 75 basis points to 3.50% and the Discount Rate by 75 basis points to 4.00%.

"The Fed's intervention...true, won't necessarily stop the selling that people are doing for fundamental reasons, but it will help calm the markets and reduce people's urge to sell because they fear the markets will freeze up....sell for fear reasons," London-based economist Mark Chandler told BloggingStocks on Tuesday.

There was also talk that the Fed's action will be coordinated with or followed by ensuing actions by the European Central Bank and the Bank of England to ensure the proper function of the markets, Chandler said.

At mid-day Tuesday, Europe's major bourses were down an average of 1% across the board. London's FTSE was down 24.90 points to 5,553.30, France's CAC 40 fell 56.86 points to 4,687.59, and the German DAX fell 147.32 to 6,642.87.