Wall Street slides to 5 year low as global markets turned upside down.

Stocks fell for a second day straights on Wall Street on Tuesday 7 October 2008, while those in Europe were mixed, on persistent anxiety over the health of the banking sector and despite central bank initiatives to shore up market confidence.

Wall Street opened with solid gains, bolstering both spirits and prices in Europe after the US Federal Reserve, the European Central Bank and EU finance ministers all announced new measures to stanch a credit crisis and protect savers' deposits.

But the rebound was short-lived, with the Dow Jones Industrial Average shedding 508.39 points, or 5.11 percent, to close at a five-year low of 9,447.11 -- worse than its 369-point slide Monday.

The tech-heavy Nasdaq plummetted 108.08 points (5.80 percent) to 1,754.88 and the Standard and Poor's 500 index slid 60.66 points (5.74 percent) to 996.23, dropping below a key level of 1,000 points and also hitting a five-year low.

Analysts at the Charles Schwab brokerage house said the market was slammed by "continuing fears about the credit crisis and worries about the health of the economy, exacerbated by Fed chairman Ben Bernanke's comments in a speech today."

Bernanke signalled the Federal Reserve would cut interest rates in response to a worsening outlook for US economic growth.

The most dramatic move Tuesday came from the Federal Reserve, which opened up its coffers to companies hit by the credit crunch with a new program that will buy up commercial paper -- the short-term debt critical for many corporate operations.

"This bold but necessary move will put the Fed in the position of essentially lending directly to businesses, rather than to the financial institutions under its regulatory umbrella," said Ryan Sweet at Economy.com.

This latest effort to overcome the credit crunch creates a new "liquidity backstop" for corporate finance, the Federal Reserve said.

It was established after the US Treasury determined it was "necessary to prevent substantial disruptions to the financial markets and the economy".

Frederic Rozier of the Meeschaert financial firm said: "The problem for the stock exchanges is extreme tension on credit markets," where banks carrying heavy debt remain reluctant to lend, leaving businesses strapped for cash.

The European Central Bank meanwhile laid out a schedule for fresh coordinated action to be taken in tandem with other central banks to expand the provision of US dollars to commercial banks.

At the same time, the 27-nation European Union more than doubled bank deposit guarantees to at least 50,000 euros (68,000 dollars) per account, in the bloc's first joint action against the global financial maelstrom.

Desperate to restore confidence in the banking system, European finance ministers also vowed to ride to the rescue of big banks whose collapse would threaten broader financial stability.

"We have agreed to assure the solidity and stability of our financial system and carry out any measure to reach that objective," said French Finance Minister Christine Lagarde, whose nation holds the EU's rotating presidency.

US President George W. Bush discussed the economic meltdown with leaders of Britain, France and Italy, seeking a common strategy ahead of crisis talks between the Group of Seven major economies in Washington on Friday 3 October 2008.

Japan and Australia pumped more than US$20 billion into the money markets Wednesday 8 October 2008 but failed to save free-falling Asian stock markets from another massive sell-off. The Bank of Japan injected 2.1 trillion yen (US$20.7 billion) into the money markets, its 16th straight day of intervention, while Australia's central bank pumped in A$1.21 billion (US$856 million).

Hong Kong meanwhile slashed interest rates by one percentage point, but like other such moves in recent days, the measure did little to stem dramatic losses in the face of the worst financial crisis since the Great Depression.

With credit tight, Hong Kong's Monetary Authority said it was cutting its key interest rate by 100 basis points effective Thursday 2 October 2008. Australia made a similar move on Tuesday 7 October 2008.

"These sorts of measures aren't working anymore," said Hiroichi Nishi, a broker at Nikko Cordial in Japan. "It's like you're trying to pump blood into a heart with clogged arteries."

Federal Reserve Chairman Ben Bernanke comments that did little to calm jittery investors by saying the latest economic data showed the prospects for the US economy had grown gloomier amid the credit crunch and global financial crisis.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he told business leaders in Washington.

Bank of America economist Peter Kretzmer said the comments offered a clear hint at a rate cut, possibly with other major central banks that could come at a Friday's gathering of G7 finance officials.

Iceland, which has been hit hard by the crisis, meanwhile nationalised its second largest bank, Landsbanki, and gave its biggest, Kaupthing, a US$678-million loan. Its third largest bank was nationalised on the week 1 October 2008.

Russia also agreed to negotiate a four-billion-euro (US$5.4 billion) emergency loan to help Iceland's fight against national bankruptcy. The European Central Bank pumped US$50 billion back into interbank money markets, but it said banks sought more than twice that amount.

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