Australia cut interest rates sharply on yesterday, presaging likely reductions in Europe later this week, and evidence of recession mounted despite glimmers of hope from major banks. For investors, the worst financial crisis in 80 years has all but eclipsed yesterday's U.S. presidential election although the result may offer some market relief with the promise of more fiscal stimulus. Whether Democrat Obama or Republican McCain wins, he will face a huge challenge in reviving the world's largest economy, which is already contracting.

Australia's bigger-than-expected 75 basis point rate cut followed cuts in the United States, China and Japan last week. Britain and the euro zone are expected to follow suit tomorrow with half point reductions, or maybe more. The recession that central banks and governments around the world have tried to ward off with trillions of dollars in bank bailouts, liquidity pumped into frozen money markets and economic pump-priming measures, looms ever larger. The Australian central bank said there was ?significant weakness? in major industrial economies in explaining why it cut rates to 5.25 percent, the lowest since March 2005.

There were glimmers of better news from banks. UBS AG, one of Europe's hardest-hit banks, said accounting effects would weigh on fourth quarter results but it had seen some encouraging signs in client flows in October. Royal Bank of Scotland, which is taking 20 billion pounds of emergency UK government funds, reported a lower-than-expected write-down of 206 million pounds ($334 million) for toxic assets in the third quarter, although it said tough markets would have an adverse effect on full-year results.

Money market rates declined in Asia, indicating a gradual easing in the strains of the credit crisis. But analysts said that still reflected central bank efforts to add liquidity rather than commercial banks lending to each other. The credit crunch, which stemmed from a collapse in the U.S. housing market, has prompted banks to clam up on lending to each other, businesses and households for over a year now.

Synchronised rate cuts by central banks and emergency government packages worth some $4 trillion may have prevented a banking sector meltdown but the world economy is in poor shape. Fears about the shrinking U.S. economy knocked stock markets, with Asia-Pacific stocks falling 0.8 percent. European stocks were virtually flat. US vehicle sales plunged in October, with General Motors Co. down 45 percent, Ford Motor Co off 30 percent and Toyota Motor Co. down 23 percent.

The European Commission said the 15-nation euro zone was in a technical recession and economic growth would come to a virtual standstill next year. Policymakers were set to gather again to plot their next moves. Euro zone finance ministers met yesterday in Brussels to discuss reform of institutions that manage the global financial market and bodies such as credit rating agencies, accounting rules-setters, banks and their management. ?We can no longer trust self regulation on financial markets. Both supervisors and regulators have to take responsibility,? Dutch Finance minister said. ?That's something to be achieved in Washington?, which hosts a summit of world leaders on November 15 to chart a way out of the crisis.