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Markets tailspin steps up pressure for world action on crisis

LONDON - Global stock markets went into freefall Friday as pressure mounted for decisive action from world leaders to contain the worst financial crisis since the Great Depression.

Stock exchanges from Tokyo to London suffered more staggering losses after the Dow Jones fell to a five-year low -- adding to the turmoil for finance ministers from the G7 richest nations to discuss in Washington.

The London FTSE 100 index slumped by more than 9.0 percent, the Paris stock market plummetted by 8.83 percent and the bourse in Frankfurt lost more than 10 percent in early trade.

Japan's headline Nikkei-225 index fell more than 11 percent before trimming losses and closing down 9.62 percent. Hong Kong and Singapore were down more than seven percent in afternoon trade and Sydney closed down 8.3 percent.

Tokyo briefly halted some trading in futures and options as the Nikkei saw its largest fall since the crash of October 1987.

"It's beyond panic," Oh Hyun-Seok at Samsung Securities told Dow Jones Newswires. "Concerns about the global economy are deepening further and there is no sign of easing in the global credit crunch."

"It is ghastly," Macquarie Equities associate director Lucinda Chan said in Sydney. "Investors are buying up gold. It's the only safe haven out there, otherwise it's red everywhere."

With no sign of a silver bullet to halt the crisis, pressure was growing for more coordinated action from governments.

Japanese Prime Minister Taro Aso, chair of the Group of Eight club of key economies which comprises the G7 plus Russia, said he would call an emergency summit if the Washington talks from Friday did not reach a deal.

Ahead of the talks, the International Monetary Fund called for governments to work together, and reactivated an emergency lifeline first used to rescue ailing economies during the 1997 Asian financial crisis.

In Washington, officials said the United States could follow Britain's decision to take preferential shares in troubled banks , effectively part-nationalising them, in a bid to increase liquidity in the credit markets.

The G7 meeting in Washington was to bring together finance ministers and central bankers from the United States, Germany, Japan, France, Britain, Italy and Canada.

US President George W. Bush vowed to take "strong action" over the crisis and emphasised "our common desire to work with our European friends to develop a best-as-possible common policy."

Marc Chandler, analyst at Brown Brothers Harriman, said despite the grim outlook, the G7 still had options available.

"We are hesitant to spread rumours, but there is increasing speculation that the G7 meeting could take another major step and that is to guarantee all interbank lending," he said.

A wave of emergency interest rate cuts, rescue packages and massive injections of capital into money markets in recent days, have all failed to assuage the panic.

On Thursday, the European Central Bank opened an unlimited cash lifeline for credit-starved institutions to be available "for as long as needed" and at least until January 20, 2009.

In addition, the ECB pumped 100 billion dollars into markets in one-day loans, doubling the amount offered just two days earlier.

A fresh injection of 45.5 billion dollars into the Japanese money markets failed to stop the rot and the crisis also claimed its first Japanese insurer, with Yamato Life Insurance filing for bankruptcy protection.

Thursday's huge sell-off on Wall Street sent US indexes to fresh five-year lows, with the Dow Jones Industrial

Average plunging 7.33 percent to end below 9,000 for the first time since 2003.

The head of the International Monetary Fund, Dominique Strauss-Kahn, called for European countries to work together and avoid unilateral steps to tackle the crisis.

Unilateral action "has to be avoided, if not condemned," he said.