Three more European governments offered blanket bank deposit guarantees before shell-shocked markets open on Monday, as regulators from Washington to Seoul scrambled to contain the deepest financial crisis in 80 years.
For its part, the U.S. Federal Reserve is pushing Citigroup Inc and rival Wells Fargo & Co to compromise over their competing bids for hobbled U.S. bank Wachovia Corp that could result in them carving up its assets.
But the flurry of measures failed to reassure.
Stocks in Asia-Pacific outside Japan dropped more than 5% on Monday to their lowest in nearly three years, and shares were expected to open sharply lower in Europe, where contagion from the U.S. subprime crisis has intensified financial industry woes.
Germany pledged on Sunday to guarantee private deposit accounts, as it clinched a deal to rescue mortgage lender Hypo Real Estate. That was followed by similar moves by Austria and Denmark, after Ireland issued the first such guarantee last week.
Adding to worries in Asia, South Korea said ahead of markets' opening on Monday that its banks were having difficulty securing foreign-currency liquidity and pledged to use its $240 bln in official reserves to help them secure enough foreign cash.
"It's become far more of a global issue that now requires far more of a global solution," said Dwyfor Evans, strategist with State Street Global Markets in Hong Kong.
"Central banks are now being seen as the main providers of liquidity within these markets. And it's very bad for sentiment," he said.
Asian shares fell sharply on concerns about whether the $700 bln U.S. rescue plan, approved by Congress last week, would be quickly implemented and be enough to shore up the economy.
Japan's Nikkei share average fell 4.8% to its lowest since February 2004, while Hong Kong's Hang Seng index fell 3.4%. South Korean stocks tumbled 4.1%, and the won sank as much as 5%.
South Korea's finance minister said the country would dip into the world's sixth-largest foreign exchange reserves to help with loans.
"The government judges that we need to deal with the situation preemptively while assuming the worst-case scenario," Kang Man-soo said, adding it would take a long time until a U.S. financial bailout starts to help ease the credit squeeze in emerging markets.
Other officials in Asia moved to reassure markets that they had enough cash.
Responding to legislators' questions about money supply in Taiwan's financial system, Perng Fai-nan, the island's central bank governor, said liquidity was "not a problem".
DIVIDED RESPONSE
Asian markets' falls followed a hectic weekend during which leaders of Europe's four biggest economies — Germany, France, Britain and Italy — decided against a coordinated bank bailout, while vowing to stabilise markets.
Italian Prime Minister Silvio Berlusconi later said Italy would revive the idea of a common bank bailout fund at a meeting of finance ministers on Monday, but Germany responded that it remained opposed to any such shared bank rescue fund. European banks have been hit hard by the fallout from a crisis that began in the United States when the housing market collapsed and bad mortgage debts multiplied.
German officials on Sunday clinched a revised rescue deal for lender Hypo Real Estate that will see commercial banks and insurers provide 15 bln euros ($20.8 bln) in liquidity, on top of an initial pledge of 35 bln euros.
BNP Paribas took control of the Belgian and Luxembourg businesses of troubled financial group Fortis on Sunday, in a complex cross-border rescue that will make Belgium the French bank's biggest shareholder.
The banking upheaval that began on Wall Street has effectively shut down interbank and other loan markets, pushing industrialised countries closer to recession.
One source of concern is Iceland, where officials, including from the central bank, have been working on a financial stability plan to address a crisis that has sent the country's currency spiraling lower and is seen as threatening its financial sector.
Expectations are building that a meeting of finance leaders from the Group of Seven major industrialised nations, scheduled for this week in Washington, could set the stage for coordinated interest rate cuts.
Financial bookmakers expect Britain's FTSE 100 to open as much as 4.5% lower on Monday, with Germany's DAX seen opening around 3.8% lower.
"We have a seriously weak and fear-driven market on our hands," said Tom Hougaard, chief market strategist at City Index in London.
