The steepest declines were in Europe and developing countries. All 18 West European stock markets were down sharply. London's main market average fell nearly nine percent, its biggest drop in nearly two decades. The Russian index dropped by 19 percent. In Brazil and Russia, trading also briefly halted.
The panic selling followed a weekend in which several central banks took action to insure deposits to prevent a run on savings institutions. A German and a Dutch bank were rescued by government action.
In New York, the Dow Jones Industrials closed down 370 points at 9.956. The index had been down 800 points earlier in the session but is still the lowest Dow close in four years.
Economists are expecting early action to reduce global interest rates as part of a coordinated strategy to keep economies growing. Many experts say the economy has slipped into recession as the stock market is down 30 percent from its October 2007 peak and consumer spending is slowing down.
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