European leaders will propose new rules for global finance on Friday to help counter an economic slump underscored by fresh figures showing U.S. unemployment at a 14-year high.
The U.S. Labor Department said the national unemployment rate shot up to 6.5 percent in October from 6.1 percent in September, its highest level since March 1994.
Adding to the gloom, Ford Motor Co reported a $3 billion third quarter operating loss and said it would cut personnel costs in North America by 10 percent as the effects of the credit crisis hurt its markets at home and abroad.
The grim news for jobs and manufacturing came after the International Monetary Fund (IMF) warned the world's richest economies face their first year of contraction since World War Two.
British Prime Minister Gordon Brown backed IMF calls for governments to try to stimulate growth to prevent the credit crisis from developing into a deep downturn.
"Coordinated action on interest rates should be complemented by action on fiscal policy," Brown told reporters.
U.S. President-elect Barack Obama has proposed a stimulus package that some experts estimate could cost up to $190 billion. Germany has approved measures designed to give its economy a 50 billion euro ($64 billion) boost.
Governments around the world have pumped trillions of dollars into saving a banking system poisoned by the spread of bad debts or "toxic" loans.
WASHINGTOM SUMMIT
A summit set for Washington on Nov 14-15 is expected to see leaders discuss new rules to avert such a crisis in the future.
The Europeans want the summit to herald fundamental change while U.S. President George W. Bush's outgoing administration has taken a more cautious stance.
Heads of EU governments were finalising their plans at a meeting in Brussels on Friday.
EU proposals include better risk management in the financial industry, closer supervision of credit rating agencies and hedge funds and reinforcing the role of the IMF as the rescue agency for troubled countries.
"We need a global financial approach and we need some common principles and rules. It is important to make a reform of the international financial institutions, this is on the agenda now," said EU Commission President Jose Manuel Barroso.
"I really believe we are living through a historic moment."
TEAM OBAMA
Obama on Friday is due to hold his first news conference since winning the U.S presidency after a meeting with his economic team, as the world awaits signs of how he might tackle the economic crisis.
Markets are keen to learn who will become Obama's Treasury secretary, but an aide said he would make no personnel announcements on Friday.
Among those seen as candidates for the job are Timothy Geithner, president of the Federal Reserve Bank of New York; former Treasury Secretary Lawrence Summers; and former Federal Reserve Board Chairman Paul Volcker.
The crisis is now hurting a growing number of businesses as debt-laden consumers curb spending and companies find it harder to access funds.
Central banks around the world have stopped worrying about inflation and are reducing borrowing costs to try to prevent the global financial crisis from turning into a deep downturn.
South Korea lowered interest rates by 25 basis points, its third cut in a month, after a deep rate cut by Britain and one by the European Central Bank on Thursday.
The interbank cost of borrowing sterling funds tumbled on Friday and euro rates also fell a day after the two major European rate cuts.
Sterling London interbank offered rates fell by as much as 120 basis points, with three-month rates at their lowest since May 2004 and overnight rates at their lowest since February 2004.
The lower rates will add to pressure on banks to pass on the cuts to their mortgage customers. European shares were flat after the U.S. jobs data, giving up earlier modest gains. The data also undermined hopes for a higher opening on Wall Street.
