However, with the upcoming Group of Seven rich nations meeting tomorrow, investors have begun to look for coordinated action to snuff out what has become a severe global threat.

The losses on stock markets this week have been huge. MSCI?s world index, a gauge which many investors use to judge their performance has already lost 12 % since last Friday?s close and is on track for its worse week in the 20 years it has been in its current form. The emerging market benchmark is in the same boat, losing 18 % for the week to date.

The FTSEurofirst, meanwhile, was touching 5 year lows on Wednesday. ?Obviously equities are not the flavour of the month to put it mildly,? said Peter Dixon, UK economist at Commerzbank.

In credit markets ? at the heart of the crisis because of a freezing up of lending ? UK banks were standing out, with the cost of insuring their debt against default falling sharply after the government bail out.

But the Markit iTraxx Crossover index, made up of 50 mostly ?junk?-rated European credits, was at 636 basis points, according to data from Markit, 20 basis points wider than late on the day before.

Money markets also showed no sign of thawing with the cost of interbank borrowing staying way above official interest rates.

Three-month dollar interbank rates were quoted as high as 6.00 % on Reuters system. This compares with market expectations that the Federal Reserve would cut interest rates to at least 1.25 % by January.

Euro rates for the same period stood at 5.35 % on Reuters system, compared with the benchmark ECB rate of 4.25 %.

Risk aversion

The low-yielding yen held onto gains after surging broadly overnight as investors fled stocks and unwound carry trades favouring higher-yielding currencies.

Sterling, however, got a boost after Britain?s bank plan.

The yen was up more than 1 % on the day against both the dollar and euro. The euro was at 136.16 yen after hitting a 3-year low of 135.02 yen. The dollar was at 99.9 yen.

Sterling was up 0.3 % at $1.7523, and also firmed against the euro at 77.86 pence.

?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. Interest rate-sensitive two-year Schatz yield was down 14 basis points at 3.035 %.

Oil touches 10- months low

■ Oil touched a 10-month low and was down by around $3 a barrel yesterday, as expectations mounted that the worst international financial crisis since the 1930s would have a major impact on demand for fuel.

US light crude for November delivery was down $2.87 at $87.19 a barrel by 1032 GMT. Earlier it had fallen by more than $4 to $86.05, its lowest level since December 6, 2007. London Brent crude fell by $2.56 to $82.10 a barrel.

The slide was in line with weakness across financial markets, which registered deep losses even after British Prime Minister Gordon Brown and Finance Minister Alistair Darling held a joint news conference to outline a 50 billion pound ($87.84 billion) rescue package for British banks.

Darling said he wanted to reduce the ?fear factor? in the banking system, but it was not enough to stop Britain?s top share index, the FTSE 100, from falling. At 1051 GMT it was down 2.5 %, having pared earlier declines.

Earlier, Hong Kong?s decision to slash its main interest rate by 100 basis points ? the biggest cut since the benchmark started a decade ago ? failed to support Asian markets.

?This morning has been totally dominated by financial markets. Weak stock markets and poor economic outlook seems to be main driving force.? said Tony Machacek at Bache Financial.

?This morning?s comments from Gordon Brown and Alistair Darling don?t appear to have given an obvious boost and with financial markets in a major tailspin, it is difficult to see an end to this downward trend in crude prices.?

Later yesterday, attention turned to oil inventory data from the US government?s Energy Information Agency (EIA).

An increase in inventories could put further pressure on crude prices.

Crude stocks probably rose for the second week in a row last week as imports continued to rebound after storm disruptions, a Reuters poll of 11 analysts showed.

Signs members of the Organization of the Petroleum Exporting Countries (OPEC) have become uneasy about oil?s sharp price drop also failed to hold up prices, following a $2 a barrel rise on the day before.

Libya joined fellow OPEC members Iran and Iraq in expressing concern this week about the impact of the crisis on oil demand.

?If this volatility continues, OPEC will have to do something,? Shokri Ghanem, chairman of Libya?s National Oil Corp, told Reuters on the day before.

OPEC?s next scheduled meeting is in Algeria in December.

Joe BROCK