By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 8 (Reuters) - Stock markets across the world
plunged on Wednesday as concerns about the worst financial
crisis in nearly 80 years and fears of a global recession
gripped investors despite government efforts to intervene.
MSCI's main benchmark index of world stocks <.MIWD00000PUS>
was at 4-year lows, down more than 2 percent, and its emerging
market stock counterpart <.MSCIEF> fell 6.5 percent.
The pan-European FTSEurofirst 300 index <> tumbled 4
percent and Tokyo's Nikkei share average <> plummeted 9.4
percent, the largest single-day percentage decline since October
1987.
Government debt prices jumped as the equity selloff reached
fever pitch and investors snatched anything resembling
stability, such as gold which rose <XAU=> as much as 2 percent.
"The deteriorating outlook for the economy and the deepening
financial crisis are pushing fears to their limit," said
Mitsushige Akino, chief fund manager at Ichiyoshi Investment
Management in Japan.
The sharp market moves came despite efforts by various
authorities to inject calm and money into the battered financial
system.
Britain unveiled a multibillion pound rescue package for
British banks that included plans to inject up to 50 billion
pounds of government money into the country's biggest operators.
It was designed to offer banks short-term liquidity, make
new capital available and give the banking system enough funds
to maintain lending in the medium-term.
U.S. Federal Reserve Chairman Ben Bernanke, meanwhile,
warned on Tuesday that turmoil in markets could cause U.S.
economic activity to be subdued into 2009 and signalled a
readiness to cut interest rates.
Bernanke's sobering and candid tone about the likelihood of
rate cuts came days after European Central Bank President
Jean-Claude Trichet suggested last week the euro zone too could
cut rates.
The Bank of England delivers its latest rate decision on
Thursday and is expected to ease.
However, with the upcoming Group of Seven rich nations
meeting on Friday, investors have begun to look for coordinated
action to snuff out what has become a severe global threat.
YEN JUMPS, YIELDS FALL
The low-yielding yen was viewed by many currency investors
as a clear favourite for relative safety.
The dollar dropped at one point below 100 yen to 99.60 yen
<JPY=> but was later down 0.5 percent at 100.84 yen. Britain's
pound <GBP=> gained around half a percent on the bank plan to
$1.7569.
"Investor risk aversion and selling of high-yielding
currencies are prominent," said Masafumi Yamanoto, head of
foreign exchange strategy for Japan at Royal Bank of Scotland.
In another sign of risk aversion, the Markit iTraxx
Crossover index <ITEXO5Y=GF>, made up of 50 mostly "junk"-rated
Euroepan credits, was at 632.5 basis points, according to data
from Markit, 16 basis points wider than late on Tuesday.
Investment flowed into government bonds, pushing yields
lower.
Interest rate-sensitive two-year Schatz yield <EU2YT=RR> was
down 13 basis points at 3.040 percent.
(Editing by Mike Peacock)
