TOKYO - THE world's major economies were to hold crisis talks later on Friday in an attempt to end a massive sell-off on the global stock markets, as Asian shares were hit by another day of panic selling.

The talks in Washington were expected to see finance ministers and central bankers from the Group of Seven richest nations hammer out new emergency measures to contain the worst financial crisis since the Great Depression.

Ahead of the talks, the International Monetary Fund called for governments to work together to tackle the crisis, while reactivating an emergency lifeline first used to rescue ailing economies during the 1997 Asian financial crisis.

In Washington, officials said the United States could follow Britain's decision to take preferential shares in troubled banks, effectively part-nationalising them, in a bid to increase liquidity in the credit markets.

But despite a wave of emergency interest rate cuts, rescue packages and massive injections of capital into the money markets, the world's stock exchanges appeared no closer to pulling out of a tailspin.

Japan's headline Nikkei-225 index fell more than 11 per cent before trimming losses and ending the morning session 10.64 per cent lower while Hong Kong and Singapore plunged more than seven per cent and Sydney shed 6.5 per cent.

Tokyo's Stock Exchange briefly halted some trading in futures and options as the benchmark Nikkei index saw its largest fall since the October 1987 crash, surpassing Wednesday's plunge of 9.38 per cent.

The Japanese exchange has now dropped more than 25 per cent this week.

A fresh injection of US$35.5 billion (S$52.7 billion) into the Japanese money markets failed to stop the rot, while the credit crisis claimed its first Japanese insurer, as Yamato Life Insurance filed for bankruptcy protection.

A massive sell off on Thursday sent US indexes to fresh five-year lows, with the Dow Jones Industrial Average plunging 7.33 per cent to end below 9,000 for the first time since 2003.

In Europe, London fell 1.21 per cent, while Paris shed 1.55 per cent and Frankfurt lost 2.53 per cent.

'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.'

'It's beyond panic,' Mr Oh Hyun Seok at Samsung Securities told newswires.

'Concerns about the global economy are deepening further and there is no sign of easing in the global credit crunch.'

The G7 meeting later on Friday in Washington would bring together finance ministers and central bankers from the United States, Germany, Japan, France, Britain, Italy and Canada.

Ahead of the talks, US President George W. Bush vowed to take 'strong action' against the crisis and emphasised 'our common desire to work with our European friends to develop a best-as-possible common policy.'

Mr Bush was to make a statement later on Friday in a bid to shore up confidence in his administration's handling of the crisis.

Mr Marc Chandler, analyst at Brown Brothers Harriman, said despite the grim outlook, the G7 still had options available.

'We are hesitant to spread rumours, but there is increasing speculation that the G7 meeting could take another major step and that is to guarantee all interbank lending,' he said.

'It is important to note that officials generally recognise that current measures are not yet sufficient to turn the corner of the crisis.'

Ahead of the meeting, the head of the International Monetary Fund, Dominique Strauss-Kahn, called for European countries to work together and avoid unilateral steps to tackle the crisis.

'Cooperation and coordination in actions is the price of success. All kinds of cooperation have to be recommended,' Mr Strauss-Kahn said at a news conference ahead of the annual meetings this weekend of the IMF and World Bank.

Unilateral action 'has to be avoided, if not condemned,' he said.

In Frankfurt, the European Central Bank opened up an unlimited cash lifeline for credit-starved institutions that would be available 'for as long as needed,' and at least until January 20, 2009.

In addition, the ECB pumped 100 billion dollars into markets in one-day loans, doubling the amount offered just two days earlier.

In Washington, White House spokeswoman Dana Perino said Treasury Secretary Henry Paulson was 'actively considering' capital injections similar to those made by the British government in a rescue package for its troubled banks.

In Berlin, Chancellor Angela Merkel meanwhile indicated said she could not rule out nationalising any German banks.

Iceland's government nationalised the nation's biggest bank, Kaupthing, completing a state takeover of its top three banks, as the country battles national bankruptcy.

As fears of a global recession grew, prices of oil sank, with the price of London's Brent crude falling below US$80 dollars a barrel in Asian trade. - AFP