By Patricia Zengerle
WASHINGTON (Reuters) - More emerging markets fell victim to the spreading global financial crisis on Wednesday and a raft of large U.S. companies posted poor results, sending fresh shivers through financial markets around the world as recession fears deepened.
Argentina's surprise plan to nationalize its private pension system caused chaos in local markets and spread gloom to other emerging markets as investors read it as a desperate government move to stave off default. The country's stock market has plunged 27 percent since the government announced the plan on Tuesday.
And in Hungary the central bank hiked interest rates aggressively to prop up its battered currency as officials said the country sought help from the International Monetary Fund. Investors, however, continued to sell the forint on concerns over the health of Hungary's banking system and its ability to finance a large external debt.
The White House said U.S. President George W. Bush will host world leaders on November 15 to discuss the financial crisis, future reforms and begin developing solutions. The White House, however, played down the idea that quick fixes would emerge at the talks.
On Wall Street on Wednesday, stocks skidded to a five-year low, slammed by disappointing results from companies including planemaker Boeing and carrier AT&T . Plummeting commodity prices drove down shares of energy and materials companies.
Oil fell 7.5 percent to below $67, a 16-month low.
The Standard & Poor's 500 index and Nasdaq Composite Index each closed at their lowest levels since 2003, slumping 6.10 percent and 4.77 percent, respectively. The Dow Jones industrial average sank 5.69 percent.
The deteriorating global economy and concern about financial market stability sent the dollar to a two-year high. Remarks by Bank of England Governor Mervyn King on Tuesday that the British economy was probably entering its first recession in 16 years helped drive the dollar to a five-year peak against sterling.
"It's a market driven by fear," said Vassili Serebriakov, FX strategist at Wells Fargo in New York.
In a rare welcome sign suggesting central banks have gained the upper hand against the credit crunch, banks trimmed the interest rates at which they lend to each other, with three-month rates hitting their lowest in about a month.
WORLDWIDE SLOWDOWN
The unprecedented efforts by monetary authorities have unlocked credit for cash-strapped borrowers, but the positive impact could be negated by a worldwide slowdown, and major central banks could be forced to cut rates.
Emerging market stocks, sovereign debt and currencies were all under intense pressure.
"You have two variables going in opposite directions. You are seeing credit risks heading lower. But people are not feeling good about the world, and the focus is shifting there," said Eric Lascelles, chief economics and rates strategist at TD Securities in Toronto.
Hungary ratcheted up interest rates by three full points to 11.5 percent to defend its forint currency.
Belarus' central bank said it had requested credit from the International Monetary Fund, and Ukrainian Prime Minister Yulia Tymoshenko said she expected Kiev to receive substantial IMF financial aid next week.
The IMF was also ready to help Pakistan, which needs funds to avoid a balance of payments crisis, and Iceland, driven close to bankruptcy.
"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.
The overarching fear was recession, which will weigh on the minds of world leaders at the G20 summit to be held in the Washington area, the first of a series. The White House said it would seek input for the summit from whoever wins the presidential election.
Minutes from the Bank of England's last meeting, at which it joined a round of rate cuts, said Britain's economy had deteriorated substantially. Prime Minister Gordon Brown admitted the global financial crisis was bound to hurt economies across the world, including Britain's.
European shares ended 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.
(Editing by Leslie Adler)
