US President George W Bush vowed to fight to rescue the US economy today as world leaders, including Australian Prime Minister Kevin Rudd, clamoured for action after Congress blocked a $US700 billion ($879 billion) bailout.
As global markets again reeled from the fallout of the financial crisis, central banks pumped out more billions and European governments rescued another bank, President Bush declared the rejection of the rescue plan was "not the end".
"The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," he said.
Moments later, Wall Street opened with a rally, the Dow Jones industrial average index rising one per cent after its huge seven per cent fall yesterday.
Globally, markets went haywire, however, gyrating wildly as traders look for direction and because the vital money market for banks has been strangled for days.
World leaders clamoured for urgent action in Washington after the House of Representatives rejected the plan to buy out banks bad debts in a vote yesterday.
"The US must take its responsibilities in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," European Commission spokesman Johannes Laitenberger said.
German Chancellor Angela Merkel called for another vote on the plan this week to restore market confidence.
British Prime Minister Gordon Brown said he had sent a message to the White House to underline "the importance that we attach to taking decisive action".
New Japanese premier Taro Aso said: "We should not let the world financial system collapse."
Back home, Mr Rudd said US allies would press Washington for action.
The deepening claimed another high-profile European victim, Dexia bank, rescued with a dawn deal by France, Belgium and Luxembourg which provided 6.4 billion euros ($11.54 billion).
France, Spain, Italy, Portugal and Poland all stressed that their banking systems were strong enough to withstand the growing pressures that had forced big European banks Fortis and Bradford & Bingley into rescues at the weekend.
French President Nicolas Sarkozy called French bankers in and "reminded banking establishments of their priority mission to finance the economy", a statement said, and central bank governor Christian Noyer asserted "the French financial system is one of the safest in the world".
Ireland issued guarantees to shore up confidence in banks after Dublin stocks plunged. And the British opposition Conservative party promised to back the Labour government if emergency action were needed.
But people on markets around the world warned that the global economy was twisting around an abyss.
Economists for Citi analysis in London said: "Stress in the core of the global financial system has intensified, creating new risks to the global economy."
This echoed previous remarks by UniCredit economist Marco Annunziata that the crisis of confidence "is now threatening to turn into a self-fulfilling run on the system, which could trigger a global financial economic meltdown".
Stocks rallied slightly in Europe after an initial slump following the lead set by Wall Street and Asian markets.
The euro fell again, to 1.4376 dollars in London from 1.4432 in New York. Saburo Matsumoto at Sumitomo Trust Bank said: "The euro may fall further. We fear the credit worries may spread into emerging economies."
Some analysts now suggest there could be concerted central bank action to cut interest rates.
"Central banks emergency cuts: if not now, when?" asked Citi analysts in London. But some other analysts doubted that there would be a pan-European initiative.
Around the world officials and commentators used the language of disaster and despair to describe the possible impact of further delay in US action on the world economy and especially the interbank lending system.
In London, a leading global financial centre along with New York, The Guardian newspaper said: "This has become a crisis of confidence in the banking system as a whole, which is unprecedented in modern times."
The Times wrote: "The collapse of the plan threatens all of Main Street, in America and further afield."
Central banks again provided huge sums to keep global banking liquid with the European Central Bank renewing one-day loans of $US30 billion ($A37.71 billion).
It also allocated 190 billion euros ($A342 billion) under a regular arrangement which once again revealed great tension on short-term bank interest rates, and then added another 50 billion dollars.
The Japanese central bank injected three-trillion yen ($A36.2 billion).
Former World bank chief economist and Nobel economics prizewinner Joseph Stiglitz, forecast: "We will have other dramatic failures of financial institutions. The American economy is headed into a long recession."
Hiroichi Nishi, equities chief at Nikko Cordial Securities in Tokyo, said: "The market is exploring where the bottom is now."
"The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," he said.
Moments later, Wall Street opened with a rally, the Dow Jones industrial average index rising one per cent after its huge seven per cent fall yesterday.
Globally, markets went haywire, however, gyrating wildly as traders look for direction and because the vital money market for banks has been strangled for days.
World leaders clamoured for urgent action in Washington after the House of Representatives rejected the plan to buy out banks bad debts in a vote yesterday.
"The US must take its responsibilities in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," European Commission spokesman Johannes Laitenberger said.
German Chancellor Angela Merkel called for another vote on the plan this week to restore market confidence.
British Prime Minister Gordon Brown said he had sent a message to the White House to underline "the importance that we attach to taking decisive action".
New Japanese premier Taro Aso said: "We should not let the world financial system collapse."
Back home, Mr Rudd said US allies would press Washington for action.
The deepening claimed another high-profile European victim, Dexia bank, rescued with a dawn deal by France, Belgium and Luxembourg which provided 6.4 billion euros ($11.54 billion).
France, Spain, Italy, Portugal and Poland all stressed that their banking systems were strong enough to withstand the growing pressures that had forced big European banks Fortis and Bradford & Bingley into rescues at the weekend.
French President Nicolas Sarkozy called French bankers in and "reminded banking establishments of their priority mission to finance the economy", a statement said, and central bank governor Christian Noyer asserted "the French financial system is one of the safest in the world".
Ireland issued guarantees to shore up confidence in banks after Dublin stocks plunged. And the British opposition Conservative party promised to back the Labour government if emergency action were needed.
But people on markets around the world warned that the global economy was twisting around an abyss.
Economists for Citi analysis in London said: "Stress in the core of the global financial system has intensified, creating new risks to the global economy."
This echoed previous remarks by UniCredit economist Marco Annunziata that the crisis of confidence "is now threatening to turn into a self-fulfilling run on the system, which could trigger a global financial economic meltdown".
Stocks rallied slightly in Europe after an initial slump following the lead set by Wall Street and Asian markets.
The euro fell again, to 1.4376 dollars in London from 1.4432 in New York. Saburo Matsumoto at Sumitomo Trust Bank said: "The euro may fall further. We fear the credit worries may spread into emerging economies."
Some analysts now suggest there could be concerted central bank action to cut interest rates.
"Central banks emergency cuts: if not now, when?" asked Citi analysts in London. But some other analysts doubted that there would be a pan-European initiative.
Around the world officials and commentators used the language of disaster and despair to describe the possible impact of further delay in US action on the world economy and especially the interbank lending system.
In London, a leading global financial centre along with New York, The Guardian newspaper said: "This has become a crisis of confidence in the banking system as a whole, which is unprecedented in modern times."
The Times wrote: "The collapse of the plan threatens all of Main Street, in America and further afield."
Central banks again provided huge sums to keep global banking liquid with the European Central Bank renewing one-day loans of $US30 billion ($A37.71 billion).
It also allocated 190 billion euros ($A342 billion) under a regular arrangement which once again revealed great tension on short-term bank interest rates, and then added another 50 billion dollars.
The Japanese central bank injected three-trillion yen ($A36.2 billion).
Former World bank chief economist and Nobel economics prizewinner Joseph Stiglitz, forecast: "We will have other dramatic failures of financial institutions. The American economy is headed into a long recession."
Hiroichi Nishi, equities chief at Nikko Cordial Securities in Tokyo, said: "The market is exploring where the bottom is now."
