European shares closely tracked the New York Stock Exchange, going into a frenzied freefall after the start of trade on Wall Street, briefly pulling back and then plummeting.

The Dow Jones Industrial Average was down 3.62 percent at 8,268 around mid-day while the Nasdaq exchange had lost 2.72 per cent to reach 1,600.39.

The Dow had been clawing back lost ground, after an earlier plunge of 7.9 per cent, until Mr Bush blamed 'uncertainty and fear' for much of the global financial meltdown and insisted US authorities had the tools to confront the crisis.

Worries are understandable but 'anxiety can feed anxiety and that can make it hard to see all that is being done' to address the problem, he said, promising, 'We can solve this crisis, and we will.'

In Europe, Frankfurt, London and Paris plunged again by about 10 per cent after the Wall Street open before paring their losses but remained down by 6.0-7.0 per cent in value.

'Sadly it is now impossible to call the bottom of this market rout,' said Mr Howard Wheeldon, senior strategist at BGC Partners in London.

'Irrational fear has gripped (investors) and it seems that markets will now trash almost anything that walks. For now it is unstoppable.'

The initial losses came as Japan's Nikkei plunged 9.6 per cent, while major European bourses slid as much as 11 per cent amid heightened worries about a seizing up of the global financial system.

Market action came as world finance chiefs were preparing an emergency meeting in Washington. Interest rate cuts and billions of dollars? worth of cash injections by central banks failed to calm the mayhem.

'The crisis is now self-reinforcing and shows no signs of abating,' said Mr Chris Lafakis at Economy.com.

Tokyo nosedived, as the credit crisis claimed its first Japanese financial institution with the bankruptcy of Yamato Life Insurance, driving the Nikkei stock index down by the biggest daily drop for two decades.

Hong Kong lost 7.2 per cent as panic swirled about the state of the global banking industry.

In Europe, investors were also reacting to this week's nationalisation of Icelandic banks Glitnir, Kaupthing and Landsbanki, victims of the crisis.

'We are drowning in a sea of red numbers,' said Barclays Wealth analyst Henk Potts.

'Investors are concerned about the exacerbation of the credit crunch and the gloomy forecasts for economic growth.'

'The reality is that most investors have been spooked by the sheer pressure that the credit crunch is putting on the global economy.'

'Today looks to be starting off as a complete bloodbath. The FTSE was obliterated on the open,' said Capital Spreads managing director Simon Denham in London.

He also warned investors, 'Do not bet the house on a turn in the markets.'

Back in Asia, the Tokyo market suffered the biggest loss in two decades, surpassing Wednesday's plunge of 9.38 per cent. The Nikkei has lost more than 24 per cent over the past week.

The tumoil quickly spread to other Asian markets. Sydney plunged 8.3 per cent, Singapore lost 7.34 per cent and Seoul slid 4.1 per cent. Shanghai finished 3.57 per cent lower.

Indian shares closed down 7.07 per cent on Friday, despite an injection of liquidity from the country's Reserve Bank.

'It is ghastly,' said Macquarie Equities associate director Lucinda Chan in Sydney.

'Investors are buying up gold. It's the only safe haven out there, otherwise it's red everywhere.'

Japanese Prime Minister Taro Aso warned the slump 'has reached a point where it affects the real economy.'

The Bank of Japan pumped a total of 4.5 trillion yen (S$67.43 billion) into money markets, the most since the financial crisis started, while the stock exchange briefly halted some trading in futures and options.

Singapore eased monetary policy for the first time in more than four years.

In Russia, regulators ordered the two main stock markets to remain closed after sharp falls in the US and Asia, local media reported.

Markets were hoping for even more radical action from finance ministers and central bankers in the Group of Seven rich nations, which was to meet in Washington later on Friday after emergency interest rates cuts by top world central banks this week failed to calm the turmoil.

The price of safe-haven gold rose while oil prices fell on worries about the prospect of weaker demand and as investors liquidate assets. Brent North Sea crude sank below the US$80 mark for the first time in about a year. -- AFP