Markets dive on recession fears
The Dow Jones index fell 733 points to 8,577 points, in its biggest percentage fall since 26 October 1987.
The panic later spread to Asian markets, with Japan's Nikkei average dropping more than 4% in early trading.
Earlier, there were similar plunges in European markets - London fell 7% and Frankfurt and Paris both lost 6%.
Ben Bernanke, the chairman of the Federal Reserve, warned that the US economy now faced a "significant threat" from the credit crisis.
Treasury Secretary Henry Paulson has hinted he does not expect to return to the post in the new US presidential administration which will follow the November election.
In an interview on CNBC, he said he meant to ensure a "first-rate transition", "whoever the new treasury secretary is".
Some on Wall Street have expressed concern about Mr Paulson leaving in the midst of the credit crisis, Reuters news agency reports.
Slowing economy
Many investors are now convinced that the US economy, if not already in a recession, is moving towards one.
Meanwhile the leaders of the G8 major industrialised nations have agreed to hold a summit with other countries to discuss global financial reform.
The move follows a call by UK Prime Minister Gordon Brown to rebuild the IMF to help regulate the world's financial systems.
Mr Brown told that the meeting would take place in "the next few weeks".
In the US, the economic impact of the credit crisis was highlighted in two reports published on Wednesday.
September retail sales recorded their biggest monthly decline in more than three years, while a Federal Reserve report showed economic activity had weakened across the country.
In a speech in New York, Mr Bernanke said the US had avoided making the mistakes that helped plunge the country into the 1930s Great Depression.
He pledged that the Fed would continue to fight the credit crisis. But he warned it would take time for the country's economic health to mend.
"The turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," he said.
"The last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the US economy."
Asian stocks plummeted Thursday, with Tokyo's market plunging more than 10 percent, after another dive on Wall Street as worse-than-expected data about the U.S. economy heightened fears of a global recession.
Japan's benchmark Nikkei 225 stock average slid 911 points, or 9.6 percent, to 8,635.56, after earlier falling as much as 10.3 percent. Hong Kong's key index lost 963.65 points, or 6 percent, to 15,034.65.
South Korea's Kospi was down 7.2 percent, Australia's benchmark was off 6.3 percent and Singapore's index lost about 6 percent.
Investors were unnerved by U.S. data showing the country's retail sales fell 1.2 percent in September, almost double the 0.7 percent decline analysts expected. Other readings, released by the U.S. Federal Reserve, indicated the economy continued to slow in the early fall as financial and credit market problems took a turn for the worse.
The figures were ominous signs that the world's largest economy -- a critical export market for Asia -- was sliding into recession.
"Sentiment is deteriorating very fast. People are losing what little confidence they have on a day-by-day basis," said Jacky Choi, a Hong Kong-based fund manager at Value Partners Ltd., which manages about US$5 billion in Asia. "Everyone is very worried about the economy in the U.S and around the world."
In New York Wednesday, the Dow Industrial average ended down 733.08, or 7.87 percent, at 8,577.91 -- the biggest percentage drop since the 8 percent drop on Oct. 26, 1987, which followed Black Monday, the Oct. 19 crash that sent the blue chips down 22.6 percent in a single session.
The massive selling accelerated as the U.S. Federal Reserve Chairman Ben Bernanke warned in a speech Wednesday that patching up the credit markets won't provide an instantaneous jolt to the economy.
Oil prices continued to fall. Light, sweet crude for November delivery slid US$1.48 to US$73.06 in Asian trade on the New York Mercantile Exchange.
European markets sank Wednesday, with Britain's FTSE 100 index dropping 7.2 percent to 4,079.59, while Germany's DAX ended down 6.5 percent at 4,861.63
In Latin America, too, stocks plunged. Brazil's Ibovespa stock index sank 11.4 percent to 36,833. The sell-off triggered an automatic 30-minute suspension of mid-afternoon trading. Argentina's Merval index plunged 12.2 percent.
Fears about the outlook for the world economy have overtaken the relief the markets breathed at the start of the week on the unveiling of a series of bank rescue packages from governments around the world.
On Tuesday, the U.S. government followed Europe's lead and announced it will pump some $250 billion into shares of its leading banks, including JP Morgan Chase & Co., Bank of America Corp., Goldman Sachs Inc. and Citigroup Inc.
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