Overnight carnage on Wall St for a fifth consecutive day - pummelling indexes to fresh five year lows - has prompted the United State's Federal Reserve central bank to expand its lending programme in a surprise move.
The credit crunch is cutting deeper and spreading the cash-drought malaise with increasing alarm from Wall St to Main St in the US, and still tarnishing investor confidence worldwide.
The New Zealand SE50 index was faring best of all the Asia Pacific sharemarkets yesterday, closing down 1.86%, while the Australian market closed down 4.96% on the broader All Ords and 4.99% on the ASX/Standard and Poor's 200.
Asian took immediate hits in early trading, to follow the US market, with the Singapore Straits Times down 4.22%, South Korea's Kospi down 3.65%, China's Shanghai Composite down 3.08%, Japan's Nikkei down 4.52%, and Hong Kong's Hang Seng down 5.61%.
The Fed's announcement of its new commercial paper facility initially stemmed the US stock plunge on Tuesday, but then stocks resumed haemorrhaging.
Trading on New York's main indexes closed more than 5% down each, after a fifth- consecutive-day loss, totalling almost a 13% loss in value.
The blue-chip Dow Jones Industrial Average sank a further 5.11% on Tuesday.
The Standard & Poor's 500 Index was down 5.74%.
The tech-heavy Nasdaq Composite Index shed a further 5.80%.
The Fed is now looking beyond the US banking and finance organisations to shore up ordinary businesses, coming under pressure to find cash to meet short-term payroll and supplies commitments.
ABN Amro Craigs broker Peter McIntyre said it was a "major threat" to the US economy when cash was short for pay cheques.
As an 80% service-sector provider economy, the Fed and Government had to boost consumer spending, as opposed to the requirements of production-related economies elsewhere.
"It can be likened to the US economy having a heart attack, but requiring any number of valve replacements," he said.
Mr McIntyre said the lack of co-ordination between central banks in Euro-zone had further spooked investors, and this had created more market volatility.
New Zealand had fared well because of its lack of exposure to the US bank-related problems.
In the face of ordinary US companies being unable to find lenders to borrow cash for payrolls or to buy supplies, the Fed's short-term debt facility for "commercial paper", a sector estimated to be worth $US1.3 trillion, will become a critical two to three-month lending lifeline to many businesses and corporations.
The extent of the commercial paper facility has not been revealed.
It is separate from Friday's $US700 billion bail-out package.
Mr McIntyre said there are now increasing calls for all the world's central banks to co-ordinate cash rate cuts, to instil some stability and confidence in the markets, investors and businesses.
"The panacea of last week's [$US700 billion, $NZ1,143 billion] bail-out was that every thing would be OK overnight. It is clearly not working," Mr McIntyre said.
The human behavioural reaction of investor sentiment in the US, with panic selling to claw back cash, "was beginning to take over".
This was an element "which is hard to rein in", Mr McIntyre said.
However, he noted that during the 1987 crash global markets lost 22% in a single day, while the present problems have wiped 32% in value off markets, but over a 14-month period.
There remains increasing calls for the Fed to ramp up its intervention beyond the $US700 billion bail-out package signed last week, and also its Tuesday undertaking to begin buying up large, but unspecified amounts, of short-term "commercial paper" debt.
