Global stocks have plummeted to five-year lows at the end of a brutal week.
Even the traditional safe havens of gold and government bonds suffered as fear-stricken investors sought refuge in cash.
However, the United States stock markets recouped a good portion of their losses late in the day, with the Dow Jones index finishing down just 1.49% or 128 points.
In contrast, European sharemarkets suffered huge losses on Friday, closing down about 8%. Prices in London plunged almost 9%.
Oil fell below $US80 a barrel for the first time in a year, amid fears a recession would crimp energy demand and the US dollar rose to a 15-month high as investors scrambled for cash - preferably in the world's reserve currency.
Bank bailouts, liquidity injections and coordinated interest rate cuts across the world have failed to quell investor fears and
panic selling has swept through the markets.
Treasury Secretary Henry Paulson says the US government is planning to invest directly in American banks to prevent them from failing, expanding the focus of the government's $US700 billion rescue plan.
"We're going to do it as soon as we can do it and do it effectively," Paulson said when asked about an equity-buying plan.
Investors were looking to Saturday's meeting of Group of Seven finance ministers for a policy response to the deepening global credit crisis.
They are under enormous pressure to come up with something new to save the global financial system and will not allow any major bank to fail, a European source said on Friday.
The source said officials are looking at what countries have already done, to ensure that treatment is equal and no one suffers a competitive disadvantage.
The Wall Street Journal reports the United States government is considering guaranteeing billions of dollars in bank debt and temporarily insuring all US bank deposits in a bid to unfreeze bank lending.
US measures to combat the crisis so far have focused on buying up the bad debt the banks are holding, but Britain and others are ready to put fresh capital into their banks.
The US president, George Bush, has promised Americans their government is working "aggressively" to steady the economy.
Speaking from the White House, Mr Bush said recent market turmoil was being driven by "uncertainty and fear". He said the massive $US700 billion bailout package agreed by Congress a week ago would take time to work.
Reaction around the world
More news on how governenments are responding to the credit crunch:
The Dutch government is preparing 20 billion euros in funding to support financial institutions in the Netherlands during the credit crisis.
OPEC will hold an emergency meeting on 18 November in Vienna to discuss the impact of the global financial crisis on the oil market.
General Motors says it is not considering bankruptcy protection despite slow car sales and the credit crunch, which have sent its shares fall to near 60-year lows.
Hundreds of Icelanders have vented their fury at the man blamed for the country's financial collapse: Central Bank chief David Oddsson who liberalised the country's financial sector in the 1990s.
Australian Prime Minister Kevin Rudd refuses to concede the Australian economy could slide into recession because of the crisis.
Nicaragua's leftist President Daniel Ortega said God was punishing the United States with the financial crisis for trying to impose its economic principles on poor countries.
World markets tumble
World markets have tumbled amid rising fears of a global recession, despite interest rate cuts and huge cash injections by central banks.
Stock markets in Europe, Asia and the United States lost as much as 20% of their value during the week.
In Paris the CAC 40 lost 7.73%, while in Germany the Frankfurt Dax shed 7.01%. Elsewhere in Europe there were declines of 7.14% in Milan, 8.48% in Amsterdam and 9.14% in Madrid.
In Russia, regulators suspended trading indefinitely, citing excessive volatility.
Japan's Nikkei tumbled 9.6% on Friday, registering its biggest one-day drop since the 1987 crash and losing nearly a quarter of its value in a week - the third biggest loss ever for the index.
Australia's benchmark index plunged 8.34% - a record fall since the index was created in 1993, while South Korean shares closed 4.1% lower.
New Zealand's sharemaket ended the day down 5%, bringing losses for the past fortnight to 12%.
Government bond futures soared as the rapid decline in Asia stocks forced investors to safe havens, buying gold and the yen.
Oil prices drop
Oil prices dropped 10% overnight, touching 13-month lows. The fall reflects a flight from risk amid concerns of a worldwide recession and further signs of slumping energy demand.
The International Energy Agency slashed its estimate of worldwide 2008 oil demand growth to its lowest rate since 1993, and lowered its 2009 growth forecast by 190,000 barrels per day.
London Brent crude traded down $9.18 to $73.48.
