NEW YORK: Panic selling again swept global equity markets yesterday after a co-ordinated worldwide cut in interest rates failed to bolster the battered confidence of investors who jumped into gold and other safe-havens. US stocks were highly volatile, however, briefly turning higher in the early afternoon after falling more than 2%, after European shares sank to a near five-year closing low. Investors at first had warmed to a one-half percentage point cut in interest rates by the US Federal Reserve, the European Central Bank, the Bank of England and other key central banks around the world. But confidence was short-lived, and the price of government debt, stocks and crude oil swung wildly. Short-dated euro zone government bonds rallied and gold held onto strong gains as investors fled to safe-havens. The benchmark FTSEurofirst 300 index of top European shares, after falling nearly 8% in early trade, recouped most of its losses after the rate cuts only to slide anew. Keeping investors on edge were credit markets, which remained tight despite the coordinated effort to pry them open. “Global central banks took on the rate cuts because they wanted to unfreeze the credit market, but credit spreads are still widening,” said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey. The yen surged broadly to its highest level in three years against the euro as fears widened that coordinated central bank effort may not be sufficient to thaw frozen credit markets. “It’s essentially too little, too late,” said Kathy Lien, director of currency research at GFT Forex in New York. “Liquidity is still at a premium right now and that’s weighing on the market’s risk appetite.” The euro also tumbled 1.1% to ¥136.16, after falling as low as ¥134.20, the lowest level since August 2005. With financial markets awash with signs that credit is expensive and hard to come by, investors also sold off banking shares on both sides of the Atlantic. The Dow Jones industrial average was down 64.20 points, or 0.68%, at 9,382.91. The Standard & Poor’s 500 Index was down 5.62 points, or 0.56%, at 990.61. The Nasdaq Composite Index was down 2.34 points, or 0.13%, at 1,752.54. The S&P financial index fell 0.60%. In Europe, the FTSEurofirst 300 closed down 6.3% at 940.78 points, its lowest close since December 2003. The index has lost 13.6% this week. The banking sector took the most points off the index, with Anglo Irish Bank sliding 15.6%, Deutsche Bank falling 10.7% and Banco Santander down 5.8%. Some British financial shares rose, however, after Britain announced a multi-billion pound rescue package for banks that included plans to inject up to £50bn of government money into the country’s biggest operators. Despite the flight to safety, US Treasury prices fell after two auctions totaling $16bn. The benchmark 10-year US Treasury note fell 56/32 in price to yield 3.72%, and the 2-year US Treasury note fell 11/32 in price to yield 1.64%. The dollar fell against major currencies, with the US Dollar Index off 0.55% at 80.674. The euro rose 0.70% at $1.3712, and against the yen, the dollar fell 1.36% at 99.95. Oil prices fell on worries that demand will fall due to a weakening global economy and on rising US inventories. US light sweet crude oil fell $1.98 to $88.08 a barrel. Spot gold prices rose $19.50 to $906.10 an ounce. How much the rate cuts will allow troubled banks to improve their balance sheets and keep businesses humming was unclear. - Reuters

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