(Updates with European markets, changes dateline and byline)
* Recession fears drive European shares to 5-1/2 year lows
* Oil near 17-month low, gold down more than 3 pct
* Yen ignores threat of G7 intervention
By Amanda Cooper
LONDON, Oct 27 (Reuters) - European shares plumbed fresh
5-1/2 year lows on Monday, echoing a slide in Asia prompted by a
surge in the yen as investors feared a barrage of central bank
support would not be enough to ward off global recession.
The yen continued to gain even after Group of Seven finance
ministers on Monday singled out the excessive volatility of the
currency, which sent Japanese equities to their lowest in nearly
three decades.
Little that officials said could convince panicky investors
that governments around the world can stem the fast-spreading
crisis that has ravaged financial markets and now threatens to
erode both economic growth and company earnings.
Emerging market equities fell to their lowest since
September 2004, while in Western Europe, shares slid nearly 5
percent in early trade on the FTSEurorfirst 300 index <>,
led by banking stocks and energy companies, which took a hit
from a fresh drop in the price of crude oil to 17-month troughs.
The euro fell to a two-year low against the dollar and in
another sign of profound risk aversion, European credit spreads
hovered just shy of Friday's record highs.
"There's lots of volatility, not just in the equity market
but in the interest rate and currency markets too," said Neil
Parker, market strategist at Royal Bank of Scotland.
"We're going to get further big swings as the markets watch
for what the authorities are going to do," he added.
The MSCI world index of shares <.MIWD00000PUS>, which on
Monday was down by more than 3 percent, has lost nearly 50
percent so far this year to reach its lowest since 2003 as
investors around the globe have dumped stocks.
MULTILATERAL SUPPORT
In Asia, Japan's Nikkei index <> swung wildly
throughout the session before ending down 6.4 percent at its
lowest close since 1982 as the stronger yen hit exporters such
as Canon Inc <7751.T>.
Japan pledged fresh measures on Monday to try to shield the
world's second-biggest economy from the financial crisis while
South Korea slashed interest rates and Australia's central bank
intervened for a second day to support its tumbling currency.
The actions by Asian policy makers come days ahead of a
widely expected interest rate cut of 50 basis points by the U.S.
Federal Reserve on Wednesday and the U.S. advance report on
third-quarter economic growth due on Thursday. []
"Nobody can tell for sure where the support levels are or
where the bottom is," said Castor Pang, a strategist with Sun
Hung Kai Financial in Hong Kong. "The current bear market trends
point to continuous declines in the market as fund managers
unload their positions in the face of increased redemptions."
The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS>
fell for a fourth consecutive session, losing 5.3 percent by
0830 GMT.
On Monday, the Group of Seven warned that the surging yen
posed a threat to financial and economic stability, in the
latest coordinated effort by the world's richest nations to
contain the worst financial crisis in 80 years. []
Analysts said the G7 statement suggested authorities were
getting closer to the point where they would consider
intervention, possibly jointly, to stem the yen's recent surge.
Yet the yen <JPY=>, after initially slipping slightly on the
news, climbed towards a 13-year peak against the dollar hit on
Friday, and an all-time high versus the Australian dollar as the
plunge in the Nikkei overshadowed the G7 warning.
The yen has risen as investors have rushed to unwind carry
trades built up over the last several years in which they
borrowed the low-yielding Japanese currency to invest in
higher-yielding, riskier assets and currencies.
Few expect the sinking global economy to recover quickly
despite moves by central banks to cut rates, or government
efforts that have so far included pledging about $4 trillion in
a bid to support banks and thaw frozen credit market.
Emerging markets have been hit especially hard in the global
sell-off. Several more countries are expected to turn the
International Monetary Fund after Ukraine on Sunday agreed on a
$16.5 billion loan package to ease the effects of the financial
crisis. []
The dollar fell 2.0 percent from late U.S. trade last week
to 92.3 yen <JPY=>, pulling back after rising to near 94.50 yen
after the G7 warning. The euro was down about 4 percent at 114.24
yen <EURJPY=>, near a six-year low of 113.79 yen hit on Friday.
The Australian dollar hovered near record lows against the
yen and a 5-1/2 year trough against the U.S. dollar, even after
the central bank intervened on Monday for a second day.
Mirroring global recession fears, oil <CLc1> fell 4 percent
to $61.45 a barrel, near a 17-month low, while spot gold <XAU=>
-- ordinarily a perceived safe-haven investment -- dropped by
more than 3 percent, undermined by the strength in the dollar
against the euro and the slide in crude oil.
(Additional reporting by Simon Falush in London, Rafael Nam
in Hong Kong; Editing by Victoria Main)
