Source:  Reuters

World stocks plunged to three-year lows on Monday as investors fled to government bonds, gold and the low-yielding yen, fearing policymakers’ efforts to contain the credit crisis might not be enough to prevent a recession.

Oil fell 4 percent to 8-month troughs while emerging stocks tumbled 6 percent as the worst financial crisis in 80 years spread in Europe, where more governments were forced to offer bank deposit guarantees due to a growing number of bank failures.

Panic selling of shares in Russia prompted two stock exchanges to halt trading while some banking shares in Iceland and Italy were also suspended.

In South Korea, banks were having trouble raising foreign currency funds and the government promised to give banks access to the country’s foreign exchange reserves, the world’s sixth largest at nearly $240 billion.

Despite weeks of huge liquidity injection by central banks, money markets remained tight, reflecting deep reluctance by banks to lend to each other. “We have a seriously weak and fear-driven market on our hands,” said Tom Hougaard, chief market strategist at City Index.

The FTSEurofirst 300 index fell 5.3 percent while MSCI main world equity index lost 3.2 percent to its weakest level since May 2005. The index has shed 31 percent since January.

U.S. stock futures fell 2.5 percent, indicating a sharply lower opening on Wall Street later.

A flurry of measures by countries around the world is doing little to calm investor nerves. Germany, Austria and Denmark followed Ireland in guaranteeing private deposit accounts after European leaders failed to agree a concrete common rescue scheme at a weekend meeting in Paris. Continued…

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