Mounting economic gloom swept through Japan and several emerging nations on Monday and European banks bore the scars of the worst financial crisis since the 1930s.
Rating agency Fitch cut Romania's credit rating to "junk" status in one of four emerging market downgrades and said the global financial crisis had put the ratings of South Korea, South Africa, Russia and Mexico in jeopardy.
Foreign investors have dumped east European assets on concern that countries such as Ukraine and Hungary, Romania, Bulgaria and the Baltic states may not be able to handle large foreign debt burdens.
Several nations, including Iceland, Hungary and Ukraine, have sought help from the International Monetary Fund. Fitch also cut the ratings of Bulgaria, Kazakhstan and Hungary.
In Asia, Japanese manufacturers suffered their biggest quarterly slump in machinery orders in a decade, official data showed, boding ill for capital investment as the economy teeters on the brink of recession
Even fast-growing China has not proved immune.
Beijing approved a 4 trillion yuan ($586 billion) government spending package to boost domestic demand and help the world's fourth-largest economy ride out the crisis.
China's stimulus comes on top of more than $4 trillion in government pledges around the world for bank bailouts, credit guarantees and fiscal spending to contain the damage from the worst financial turmoil in 80 years.
European Central Bank chief Jean-Claude Trichet said many nations lacked the fiscal ammunition to follow China's cue.
"They already have deficits now, which are very substantial, and for them the room for manoeuvring does not exist," he told Brazilian TV after a meeting in Sao Paulo of the Group of 20 major economies.
Some euro zone nations are set to breach the European Union's budget deficit cap of 3 percent of GDP this year and the U.S. budget is creaking under the burden of the Iraq war and $700 billion earmarked for bank bailouts.
Troubled insurer American International Group is poised to become the latest U.S. financial institution to take government money.
Its board is nearing approval of a revised package to replace a previous $85 billion rescue, a person familiar with the matter said. The U.S. government is now expected to buy $40 billion of AIG preferred shares and greatly ease lending terms.
President-elect Barack Obama is expected to top up the U.S. bailout with hundreds of billions of dollars in a fiscal stimulus package, once he takes power in January.
BANKS
Europe's biggest bank, HSBC Holdings, said its profit in the third quarter was up from a year ago as growth in Asia helped offset more than $4 billion in bad debts on U.S. home loans. But it said there would be tough times ahead.
"Without doubt, global economic growth will continue to slow during the next few quarters as recession takes hold in several mature economies," it said in a statement.
Allianz's Dresdner Bank unit posted its biggest quarterly loss since the start of the crisis, pushing the group to a 2 billion euro ($2.57 billion) net loss.
German insurer Allianz is selling Dresdner Bank, which had a third-quarter operating loss of 835 million euros, to Commerzbank to end an ill-fated foray into banking.
Spanish banking giant Santander said it would launch a 7.2 billion euro ($9.24 billion) rights, aimed at reinforcing the bank's core capital following recent purchases.
Santander, which had concerned some investors with a series of buys that some feared would dilute its core capital, also said in a statement that it would postpone a planned series of asset sales until market conditions improve.
BEIJING BOUNCE
Beijing's stimulus plan buoyed stock markets. Chinese shares soared over 7 percent and Tokyo shares gained close to 6 percent despite Japan's grim manufacturing orders report.
European stocks were up 2.7 percent.
A G20 finance officials' meeting in Brazil produced assurances there would be no let-up in efforts to pull the world economy out of the doldrums, but specific action would more likely come from a crisis summit of world leaders on Nov. 15 in Washington.
The Reserve Bank of Australia cut its outlooks for this year and next for an economy that has long been sheltered from the global turmoil by Chinese demand for its commodities.
But with Chinese industry struggling with a slump in export markets, some of Australia's top producers have been forced to scale back output and investment. On Monday, mining giant Rio Tinto announced a 10 percent cut in iron ore shipments.
