By Claudia Parsons
NEW YORK (Reuters) - Hungary raised interest rates to defend its economy, Ukraine sought IMF help, currencies tumbled against the dollar, global stock markets fell and U.S. companies announced job cuts and weaker earnings on Wednesday.
As the biggest financial crisis in 80 years wrought more havoc from Pakistan to Argentina, the White House said the first of a series of international summits on the financial crisis would be held on November 15 in the Washington, DC area.
Major U.S. stock indexes plunged around 4 percent and oil hit a 16-month low below $68.
AT&T Inc and Boeing were among companies reporting weaker-than-expected earnings, and drugmaker Merck & Co said it would cut 7,200 jobs.
Battered U.S. bank Wachovia Corp, set to be taken over by Wells Fargo & Co, posted a $23.9 billion third-quarter loss, a record for any U.S. lender in the global credit crisis.
Emerging market stocks, sovereign debt and currencies all came under intense pressure as investors unwound funding positions amid worries about the deteriorating world economy.
The dollar and the yen were gainers as investors moved out of riskier assets in other currencies.
Fears of a global recession overshadowed signs that efforts by authorities across the world to bolster the financial system were beginning to bear fruit.
Hungary ratcheted up interest rates by three full points to defend its forint currency.
Belarus's central bank said it had requested credit from the International Monetary Fund, and Ukrainian Prime Minister Yulia Tymoshenko said she expected her country to receive substantial financial aid from the IMF next week.
The IMF is also ready to help Pakistan, which needs funds to avoid a balance of payments crisis, and Iceland, driven close to bankruptcy as frozen credit markets caused its banks to fail.
"It's not that the fundamentals for emerging markets have changed. Capital is now moving back from the emerging world to the developed world," said Neil Dougall, chief emerging markets economist at Dresdner Kleinwort.
Argentina's bonds fell 7 percent after President Cristina Fernandez sent a bill to Congress on Tuesday to nationalize the country's private pension system, sending markets into freefall.
OPTIMISM?
Those problems masked some otherwise optimistic noises from various officials about the financial crisis, which has prompted billions of dollars in rescue and liquidity packages from governments around the world.
U.S. Treasury Undersecretary David McCormick, speaking in Hong Kong, said the U.S. economy was in for a challenging few quarters but could start to recover late next year.
"The name of the game is to bring back confidence to the financial market," he said.
Mervyn King, governor of the Bank of England and a major player in Group of Seven nations' discussions on the crisis, said that the worst may have passed for the financial system.
"We are far from the end of the road back to stability," he said late on Tuesday. "But the plan to recapitalize our banking system, both here and abroad, will I believe come to be seen as the moment in the banking crisis of the past year when we turned the corner.
His comments were underlined by a further drop in U.S. dollar short-term funding costs in London and Asia, a sign banks are beginning to regain trust in each other.
Emerging powerhouse Russia, whose markets have been battered during the crisis, also signaled improvements in bank lending.
"The interbank (lending) has started working normally. The rates are high but coming down. Banks have started crediting sectors again. But we still need two or three weeks for the situation to start improving," the Financial Times quoted First Deputy Prime Minister Igor Shuvalov as saying.
RECESSION LOOMS
The overarching fear, overshadowing progress in fighting financial collapse, was about the global economic gloom.
Minutes from the Bank of England's last meeting, at which it joined a coordinated round of rate cuts, said the UK economy had deteriorated substantially and King, in his Tuesday comments, said it was probably entering its first recession in 16 years.
Such worries swept financial markets.
The Dow and S&P 500 fell around 4 percent in morning trade.
European shares were down 5 percent and Japan's Nikkei average ended down 6.8 percent.
In emerging markets, MSCI's sector index was at its lowest since June 2005, and sovereign debt spreads widened beyond 700 basis points over Treasury yields for the first time since early 2003.
Currencies other than the forint were also battered, with the Turkish lira falling to the lowest in more than two years and South Africa's rand at its lowest in more than 6 years against the dollar.
"Now we are going to have to deal with the problems of a business cycle downturn, which in all likelihood will be a fairly intense one," said Sanjay Mathur, economist at the Royal Bank of Scotland in Singapore.
A host of other U.S. company results on Wednesday gave a snapshot of conditions across an array of industries and sectors in the world's largest economy.
Tobacco companies Philip Morris International and Reynolds American Inc posted quarterly profits that beat analysts' estimates, as did fast-food chain McDonald's Corp. But they were bright spots amid the gloom.
(Editing by Steve Orlofsky)
