Stock exchanges from Tokyo to London to New York suffered more staggering losses — adding to the turmoil for finance ministers from the Group of Seven richest nations to discuss in Washington.
Wall Street shares plunged in opening trade, with the Dow Jones Industrial average sliding 682 points or 7.9 percent to fall below 8,000 points.
London's FTSE 100 index skirted very close to a 10-percent loss before a slight pullback, while in Paris the CAC 40 dived 10.57 percent and there were similar losses in Frankfurt.
Japan's Nikkei-225 index closed down 9.62 percent, Hong Kong lost 7.2 percent and Singapore 7.34. Tokyo briefly halted some trading in futures and options as the Nikkei saw its largest fall since the crash of October 1987.
A fresh injection of 45.5 billion dollars into Japanese money markets failed to stop the collapse, and the crisis also claimed its first Japanese victim, with Yamato Life Insurance filing for bankruptcy protection.
Nowhere was immune from the rout. South America's largest stock market in Sao Paulo was suspended after the market slid more than 10 percent. Trading in Moscow was also halted.
Shares around the world have crashed over the past two weeks since the collapse of Lehman Brothers in the United States put the focus on banks' disastrous lending on the US mortgage market.
Central banks have since spent hundreds of billions of dollars trying to keep credit markets moving. The United States and Britain have spent massively to prop up their banking systems and Iceland is fighting national bankruptcy.
Justin Urquhart-Stewart, marketing director at London-based Seven Investment Management, said the world now faces a "perfect storm" with a banking system in crisis and a dramatically slowing global economy.
With oil prices falling below 80 dollars a barrel amid gloomy predictions for the world economy, pressure grew for more coordinated international action.
Japanese Prime Minister Taro Aso, chair of the Group of Eight club of key economies, said he would call an emergency summit if the Washington talks this weekend did not reach a deal.
Spanish Prime Minister Jose Luis Rodriguez Zapatero urged an urgent meeting of euro-zone leaders.
The G7 meeting in Washington was to bring together finance ministers and central bankers from the United States, Germany, Japan, France, Britain, Italy and Canada.
Ahead of the talks, the International Monetary Fund (IMF) called for governments to work together, and reactivated an emergency lifeline first used to rescue ailing economies during the 1997 Asian financial crisis.
US 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 on credit markets.
US President George W. Bush vowed to take "strong action" over the crisis and emphasised "our common desire to work with our European friends to develop a best-as-possible common policy."
Lending between banks is at a standstill because banks fear other banks might fail, and want guarantees that contracts will be respected. The freeze is strangling credit throughout the global economy.
A wave of emergency interest rate cuts, rescue packages and massive injections of capital have all failed to assuage the panic.
The crisis of confidence has been underpinned by increasingly pessimistic forecasts for the global economy.
In a biannual report on the world economy, the IMF forecast that the United States would fall into recession this year, barely grow in 2009 and risked performing even worse than expected given current uncertainty.

More on pages 18, 19