Financial markets took a bleak view of the future Monday, seeing contagion in a credit crisis that threatens to cascade through economies globally despite government efforts to provide relief.

The Dow Jones industrials skidded more than 470 points by midday and fell below 10,000 for the first time in four years, while the credit markets remained under strain.

Investors around the world have come to the sobering realisation that the Bush administration's US$700 billion rescue plan won't work quickly to unfreeze the credit markets.

Wrong-way bets

Global banks, hobbled by wrong-way bets on mortgage securities, still remain starved for cash as credit has dried up.

That's caused stocks to plunge in the United States, Europe and Asia, and drove investors to sink money into the relative safety of US government debt.

Tokyo's Nikkei 225 index fell to its lowest level in 4.5 years, sinking 4.25 per cent to 10,473.09.

Hang Seng index slide

Hong Kong's Hang Seng index slid 5.0 per cent to 16,803.76.

Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also dropped sharply.

By mid-afternoon Europe time, Britain's benchmark stock index, the FTSE 100, lost 245.70 to 4,734.55 - a 4.93 percent fall. Germany's DAX index fell 5.23 percent to 5,493.95. France's CAC-40 index dropped 5.59 percent to 3,852.63.

Fears about a global recession also caused oil to drop below US$90 a barrel; and the benchmark index that gauges fear in the market jumped to the highest level in its 18-year history.

The euro also slid below the US$1.36 mark for the first time in over a year.

"The fact is people are scared and the only thing they're doing is selling," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working."

The selling was so extreme that only 98 stocks rose on the NYSE - and 3,092 dropped.

That's a telling sign considering the stock market is considered a leading economic indicator, with investors tending to buy and sell based on where they believe the economy will be in six to nine months.

Monday's steep decline on Wall Street indicates that investors are becoming more convinced that the country is leading a prolonged economic crisis that is spreading to other nations.

Prop up failing banks

Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

As the US tries to shore up its battered banking system, the German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG.

- AP