Recession alarm rings around the world

World giants in the automobile, airline and technology industries have ordered emergency action in response to the financial crisis, while the IMF set aside more than $US200 billion ($A297.09 billion) for debt-laden countries.

Even a 1.5 million barrel a day production cut by OPEC failed to stop oil prices falling in the face of swelling fears of a deep global recession which led shares to take a hammering yet again.

Wall Street followed other exchanges downwards as a wave of panic selling and a meltdown in share prices swept around the world.

US shares later recovered some of their losses and fell less than many other global stock markets in early trade.

Grim financial news came in from around the world.

Iceland's government said it had asked for $US2 billion ($A2.97 billion) of support from the International Monetary Fund, the first Western country to do so since 1976.

The IMF said it had tentatively agreed to the loan and announced it had set aside hundreds of billions of dollars to rescue stricken nations.

"The IMF has more than 200 billion dollars of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries," the institution said on its website.

China, Japan and 11 other Asian nations agreed to set up an $US80 billion ($A118.84 billion) war fund to fight what ex-US Federal Reserve chief Alan Greenspan called a "once-in-a-century credit tsunami".

French automobile giants PSA Peugeot-Citroen and Renault ordered huge production cuts, while Japan's hi-tech giant Sony Corp and Europe's biggest airline Air France-KLM issued profits warnings.

In Britain, official figures confirmed the country was about to enter a recession, while Turkey's central bank took action to strengthen bank liquidity and prop up the slumping currency.

The combined impact sent shares tumbling in both Asia and Europe.

Japan's Nikkei index plunged 9.60 per cent, ending below the key 8,000-point level for the first time in more than five years, and Hong Kong fell 8.3 per cent.

European shares had lost up to 10 per cent by midday trade before mounting a late rally.

French shares still fell 8.0 per cent to finish at five-year lows, while Frankfurt's DAX 30 index and London's FTSE 100 were off around five per cent.

"The best word to describe what's going on right now is panic," said Credit Suisse strategist Satoru Ogasawara.

Technology giant Sony, a bellwether of corporate Japan , saw its shares plunge more than 11 per cent after forecasting net profit of 150 billion yen ($A2.31 billion) for the year to March, down 59 per cent on last year.

Air France-KLM suffered a near nine per cent drop in its share price after acknowledging it would be "very difficult" to meet its billion-euro ($A1.93 billion) earnings target.

Europe's biggest airline unveiled a plan to cut costs by up to 1.2 billion euros ($A2.32 billion) over the next five years.

The suffering extended to the automobile industry. with Renault ordering almost all French plants closed for at least one week and shorter shutdowns in Turkey, Russia and Slovenia.

PSA Peugeot-Citroen chairman Christian Strieff said he had ordered "massive" production cuts as the group forecast a 17 per cent fall in car sales in Western Europe in the fourth quarter.

Chrysler LLC , the number three US automobile maker, meanwhile said it would cut up to 5,000 administrative and temporary jobs by the end of the year.

ArcelorMittal, the world's biggest steel producer, shut smelting furnaces on a temporary basis in France, Germany and Belgium, according to union chiefs who met with management.

New figures showed industrial confidence in both France and Italy had fallen to the lowest level since 1993.

There was also grim data on the jobs front, with Spain's unemployment rate jumping to 11.33 per cent - the highest level in more than four years.

Adding to the gloom, OPEC oil ministers decided at emergency talks in Vienna to cut output by 1.5 million barrels per day from November 1.

The cut was designed to increase prices but Brent North Sea crude for December delivery slumped to $US61 per barrel, the lowest point since March 2007.

"There won't be any impact on inflation, there's not going to be any impact on growth," the cartel's president Chakib Khelil told reporters.

"Growth has disappeared already in the US, it's disappeared in Europe."

New figures meanwhile showed Britain's economy shrank by 0.5 per cent in the three months to September, compared with the previous quarter, marking the first contraction since 1992.

The country's economy screeched to a halt in the second quarter with zero growth. However, it must experience two successive quarters of negative economic growth to be classed as in recession.