Brazil's benchmark stock index plunged 3%in early afternoon trade on Monday, tracking a sell-off in global markets on concerns the financial crisis is deepening after insurer American International Group posted a record quarterly loss.

The Bovespa index of the Sao Paulo stock exchange sank to 37,038.01 points from 38,183.31 points on Friday. Stocks in Europe dropped more than 4 percent and in the United States the Dow Jones industrial average was down 2.3 % and the Nasdaq Composite Index fell 1.7 %.

State-run Petrobras led Brazil's markets lower, dropping 2 percent as crude oil prices fell sharply on concern a deteriorating global economy will sap energy demand. Mining giant Vale tumbled 3.4%, while steelmaker CSN declined 3.6 %.

(Reporting by Elzio Barreto; Editing by Theodore d'Afflisio)