KEY POINTS:
The US bank bailout is insufficient and is contributing to the renewed plunge in world stock markets, Japan's Prime Minister is warning.
In line with the sell-off around the world, more than $1.6 billion was wiped yesterday off the New Zealand exchange's top-50 index, which dropped nearly 5
per cent.
Australia's leading stocks closed down nearly 6.7 per cent as resource stocks were hammered because of fears of a worldwide recession.
Japanese Prime Minister Taro Aso made his comments on the bailout as his country's Nikkei stock index plummeted 11.41 per cent - its biggest one-day fall since 1987.
The international sell-off came after the Dow Jones industrial average plunged 7.8 per cent on Wednesday as jittery investors dumped shares following sobering reports on the American economy.
Congress this month approved a plan to use US$700 billion of public money to buy bad mortgage-related securities and loans from troubled financial institutions. About US$250 billion of that will be used to buy shares in leading US banks.
Mr Aso said the continued market volatility suggested more action was needed.
Japan has said it is willing to offer money to help prop up crumbling financial companies around the world.
It has more than US$950 billion in foreign exchange reserves, second only to China's US$1.9 trillion.
In a sign of how deeply the financial crisis is hitting Europe, the Swiss Government last night said it would help UBS and Credit Suisse raise billions of dollars in new capital to shore them up.
And yesterday, the Group of Eight major industrial nations said they would hold a global summit to forge common action to prevent another economic meltdown.
It followed the announcement that all European Union nations now back radical restructuring of international institutions such as the International Monetary Fund and World Bank.
In New Zealand, investors were hit hard yesterday. Telecom shares dropped to their lowest in more than 16 years, losing 21c or 8.61 per cent, to $2.23.
Contact Energy was down 22c to $7.13 and Fletcher Building was down 37c to $5.86.
ASB Securities adviser Stephen Wright said the bad news kept on bearing down on the market.
"I guess the feeling is that governments have expended themselves trying to solve the credit crunch and have very little firepower to stave off recession."
First NZ Capital research manager Barry Lindsay said the New Zealand market was a sellers' market. But analysts at his firm believed all the grim news had been priced in.
- NZ HERALD STAFF, AGENCIES