Washington - The US government said Monday it would plow $125 billion into nine top banks under its huge bailout plan, but shares slid worldwide amid recession fears and despite a G7 pledge to take action.
In a bid to ease a credit crunch threatening wider damage to the economy, nine US institutions will get half of the $250 billion the government wants to invest in banks as part of a massive rescue of the financial system.
"We executed the agreements for the nine institutions late last night so the money will go out the door for these institutions early this week," Assistant Treasury Secretary David Nason told CNBC television.
The capital injections are from a $700 billion US government rescue plan that initially sought to address the problem of liquidity for banks by offering to buy up their toxic assets.
The nine banks are Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon, State Street and Merrill Lynch, which is soon to be taken over by Bank of America.
It came as economic worries dominated the campaign ahead of the November 4 US presidential election.
Despite global efforts to revive spirits, growing recession fears sent share and oil prices plummeting Monday, with markets shrugging off new moves to protect shell-shocked economies.
A new survey showed business confidence in Germany, Europe's number one economy, at its lowest point for more than five years and the IMF unveiled rescue plans for Ukraine and Hungary.
South Korea slashed its key interest rate, Japan announced fresh action to boost its ailing stock market and Australia's central bank intervened to prop up its currency.
The European Central Bank announced one-week dollar loans against euro cash as part of efforts to keep interbank money markets flowing.
But the moves failed to restore calm as Tokyo's main index hit a 26-year low. On the oil market, Brent crude prices fell below $60 per barrel as traders responded to the potential impact of recession on energy demand.
"After last week's turmoil in equity markets, many had been hoping that the new week would bring about a degree of stability but ... so far there's little to suggest this will be the case," said CMC Markets dealer Matt Buckland.
The G7 club of rich nations vowed to cooperate to stabilise the system, and voiced concern about "excessive volatility" in the Japanese yen.
Japan's Nikkei index plunged 6.36 percent by the close, hitting the lowest level since October 1982 before the economic bubble, with similar turbulence across Asia.
There were also declines in Europe, as London and Paris fell but managed to trim their losses late in the day, while in Frankfurt a surge in Volkswagen shares helped the DAX close in positive territory.
US stocks opened weaker but showed some signs of a comeback. Coming off steep opening losses, the Dow Jones Industrial Average traded down 0.39 percent to 8,346.14 in the morning.
A statement by the G7 key economies - Britain, Canada, France, Germany, Italy, Japan and the United States - sought to calm nerves by affirming their "shared interest in a strong and stable international financial system".
In the foreign exchange markets, the euro dived under 1.24 dollars in early trading, hitting the lowest point for more than two years, after a key index showed business confidence dropped in Germany for the fifth month running.
The monthly business climate index calculated by the economic research institute Ifo fell to 90.2 points in October from 92.9 points in the previous month, its fifth straight drop.
That marked the lowest level since May 2003, when it reached 89.6 points.
"Germany is heading for a serious recession," warned Bank of America analyst Holger Schmiedling.
The European Central Bank, which cut its main lending rate by 0.50 percent earlier this month as part of concerted action to avert a collapse in the banking system, indicated a further cut could be on the cards.
ECB President Jean-Claude Trichet said another cut in the bank's key interest rate was "possible" when its board meets next month.