U.S. banks lined up for government cash, the Group of Seven expressed concern about the soaring Japanese yen, and countries in Asia and Europe took emergency actions to shore up their financial positions as the credit crisis threatened a deep global recession.
South Korea slashed interest rates, Australia intervened in the currency market, Gulf Arab oil producers urged quicker monetary union, and the International Monetary Fund bailed out Hungary and Ukraine.
The credit crisis, which began with failing U.S. mortgages, has mushroomed into a worldwide rout as investors sell stocks and commodities, shun risky emerging markets and seek out only the safest government bonds and currencies.
But there were some promising signs that government efforts to revive credit markets were beginning to pay off as borrowing costs eased. Major U.S. stock indexes posted modest losses.
The U.S. Federal Reserve set the terms for its latest program to buy commercial paper, bolstering a market that is vital for funding companies' day-to-day business activities.
Financial companies including Comerica Inc, SunTrust Banks Inc and State Street Corp agreed to sell stakes to the U.S. Treasury Department as part of the $700 billion rescue plan approved by Congress earlier this month.
Loews Corp, a conglomerate run by the billionaire Tisch family, said it would inject up to $1.25 billion of new capital into its CNA Financial Corp commercial insurance unit after bad investments drove up losses.
In the U.S. housing market, the root of the global crisis, government data released on Monday showed that sales of newly constructed single-family homes rose in September and inventories shrank as builders slashed prices to their lowest level in four years.
The U.S. central bank is almost certain to trim short-term interest rates at its policy-setting meeting later in the week, and British Prime Minister Gordon Brown hinted that central bank action may be more widespread.
"Now inflation is actually coming down over the next few months and that will mean that it gives scope to all the monetary authorities, including the Bank of England, 'round the world to make a decision about interest rates," he told the
BBC.
The European Central Bank could cut interest rates at its next meeting on November 6, ECB President Jean-Claude Trichet said on Monday.
Despite a less-dire-than-expected start on Wall Street, where major indexes were down less than 1 percent, world financial markets reacted sharply to the twin perils of financial crisis and global recession.
MSCI's main world stock index was down 2.7 percent, closing in on a 50 percent decline for the year to date. Its emerging market counterpart was down 3.5 percent, having earlier hit a four-year low.
The FTSEurofirst 300 index was down .6 percent.
COOLING THE YEN
Volatility has surged across financial markets as investors are forced to sell assets — often bought with borrowed money — to repay creditors or cover margin calls as asset prices fall and credit limits are breached.
It has most recently hit currency markets, described by David Shairp, global strategist at JPMorgan Asset Management, as "the new apex of the crisis."
A brief G7 statement focused on the yen, fanning speculation the Bank of Japan would intervene in currency markets for the first time in four years.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," said the group, comprising the United States, Japan, Germany, Britain, France, Italy and Canada.
The yen's rapid ascent against the dollar and euro is making Japanese exports much more expensive at a time when the country's overseas customers are lurching toward recession.
The dollar, however, was rising against major currencies except for the yen, so there was skepticism about whether any coordinated action on the currency would be forthcoming.
The U.S. currency was up more than 1 percent against a basket of major currencies on Monday.
The Reserve Bank of Australia intervened in the currency market, buying Australian dollars for U.S. dollars in Europe.
FOR RICHER OR POORER
Mitsubishi UFJ Financial Group, Japan's biggest bank, said it would raise up to $10.6 billion to replenish a capital base depleted by a plunging stock market and its investment in Morgan Stanley.
Prime Minister Taro Aso said after an emergency meeting the government would expand a scheme that allows banks access to public funds and tighten rules on short-selling shares.
South Korea resorted to a record interest rate cut as policymakers grappled with the 15-month-old crisis that has shattered investor confidence, and threatens a deep recession.
"Today's bigger-than-usual rate cut is aimed at helping prevent a sharp slowdown in domestic demand and the overall economy," Bank of Korea Governor Lee Seong-tae during his news conference after a 75 basis point cut to 4.25 percent.
The crisis was also taking a heavy toll on emerging markets as investors withdrew funds and commodity-based economies struggled with falling prices for everything from corn to copper.
The IMF said it had reached an agreement with Hungary to provide a "substantial financing package" in the next few days that would include funding by the European Union and some individual European governments.
It agreed on a $16.5 billion loan for Ukraine on Sunday.
"The focus has shifted to vulnerabilities in emerging markets, and policy initiatives aimed at reducing the impact of dysfunctional global credit markets on emerging market countries will be key in the short-term," said Goldman Sachs analyst Jens Nordvig.
