Asias markets nose dive again; Hong Kong closure starts crisis.
Thailands currency hit new lows, but the London stock market recovered much of the days lost ground after a huge sell off in the morning was halted by a late rally on Wall Street.
The heads of the worlds most powerful centre banks drew comfort from signs that Koreas economy may be over the worst.
But Asian markets remained highly volatile and Hong Kong, Tokyo and Sydney all tumbled, while the yen fell against the dollar and the Thai baht nose-dived. Observers said the danger is that deflation stemming from Asia could send western economies, particularly the US, spinning into recession.
"We are witnessing extraordinary moves in global markets," said one London-based financial dealer. "Everyone is now starting to talk bearishly."
International policy makers have acted on a case-by-case basis as one Asian economy after another plunges into turmoil.
"We hope (South) Korea is now on the way to improvement, the president of Germanys Bundesbank Mr Hans Tietrneyer said after a regular monthly meeting of the Group of 10 leading central bank heads in Basle.
International help of nearly $60 billion (pounds 37.5 billion) has been arranged to prop up South Korea.
In Hong Kong, the blue chip Hang Seng index crashed through the 8,000 barrier soon after it opened, shedding 11 percent to its lowest level since March 1995 before recovering to close 773 points or 8.70 percent weaker at 8,121.06.
Confidence was hammered following the demise of high-flying investment bank. Peregrine Investment Holdings and rising interest rates. The territorys stock market has now lost more than half its value since it peaked on August 7. Tokyo sank 2 21 percent to 14,664 sparking renewed jitters about the health of its banking sector, while Austalian shares were down 2 33 percent at 2.542.
But Jakarta bucked the regional trend on market hopes that renewed talks between senior officials from the United States and the International Monetary Fund could find a resolution to Indonesias woes.
US deputy treasury secretary Mr Lawrence Summers said he had held good meetings with Indonesian officials in preparation for talks with President Suharto today.
Signs of the recovery in Korea, meantime, saw the won and stock markets rally. Leading European
stock markets followed Asian shares lower, tumbling by between two and three percent.
The fear now was not that Western markets would suffer one large, corrective hit, but be slowly eroded.
"Im not saying these markets are going to go into major meltdown," said Mr Robin Marshall, chief economist at Chase in London. "The danger is that markets will grind lower."
The decision by Indonesias state owned plane maker to press on with expensive projects showed its insensitivity to the countrys economic crisis, analysts said.
Industry Pesawat Terbang Nusantara pledged at the weekend to proceed with its pounds 1.25 billion project to build passenger jets, despite the fragile economic climate.