The euro fell to a two-year low against the dollar and in another sign of profound risk aversion, European credit spreads hovered just shy of Friday's record highs.

'There's lots of volatility, not just in the equity market but in the interest rate and currency markets too,' said Mr Neil Parker, market strategist at Royal Bank of Scotland.

'We're going to get further big swings as the markets watch for what the authorities are going to do,' he added.

The MSCI world index of shares, which on Monday was down by more than 3 per cent, has lost nearly 50 per cent so far this year to reach its lowest since 2003 as investors around the globe have dumped stocks.

In Asia, Japan's Nikkei index swung wildly throughout the session before ending down 6.4 per cent at its lowest close since 1982 as the stronger yen hit exporters such as Canon Inc.

Japan pledged fresh measures on Monday to try to shield the world's second-biggest economy from the financial crisis while South Korea slashed interest rates and Australia's central bank intervened for a second day to support its tumbling currency.

The actions by Asian policy makers come days ahead of a widely expected interest rate cut of 50 basis points by the US Federal Reserve on Wednesday and the US advance report on third-quarter economic growth due on Thursday.

'Nobody can tell for sure where the support levels are or where the bottom is,' said Mr Castor Pang, a strategist with Sun Hung Kai Financial in Hong Kong. 'The current bear market trends point to continuous declines in the market as fund managers unload their positions in the face of increased redemptions.'

The MSCI index of Asian stocks outside Japan fell for a fourth consecutive session, losing 5.3 per cent by 4.30pm.

On Monday, the Group of Seven warned that the surging yen posed a threat to financial and economic stability, in the latest coordinated effort by the world?s richest nations to contain the worst financial crisis in 80 years.

Analysts said the G7 statement suggested authorities were getting closer to the point where they would consider intervention, possibly jointly, to stem the yen's recent surge.

Yet the yen, after initially slipping slightly on the news, climbed towards a 13-year peak against the dollar hit on Friday, and an all-time high versus the Australian dollar as the plunge in the Nikkei overshadowed the G7 warning.

The yen has risen as investors have rushed to unwind carry trades built up over the last several years in which they borrowed the low-yielding Japanese currency to invest in higher-yielding, riskier assets and currencies.

Few expect the sinking global economy to recover quickly despite moves by central banks to cut rates, or government efforts that have so far included pledging about US$4 trillion (S$6.05 trillion) in a bid to support banks and thaw frozen credit market.

Emerging markets have been hit especially hard in the global sell-off. Several more countries are expected to turn the International Monetary Fund after Ukraine on Sunday agreed on a US$16.5 billion loan package to ease the effects of the financial crisis.