By Sarah Thompson Oct. 10 (Bloomberg) -- Stocks tumbled, driving the MSCI World Index to its worst week in more than three decades, on concern the deepening credit crisis will send the global economy into recession. The yen rallied as investors shunned higher- yielding assets. Rio Tinto Group, E.ON AG and Barclays Plc fell more than 14 percent in Europe. Japan's Nikkei 225 Stock Average slumped 11 percent, the second-biggest drop on record. The yen rose to 99.11 per dollar, up 6 percent this week, the most in a decade. Oil tumbled more than $5 a barrel on concern the economic slowdown will stifle demand. The MSCI World lost 3.9 percent to 920.96 at 12:57 p.m. in London, extending this week's drop to 19 percent, the most since records began in 1970. Standard & Poor's 500 Index futures slid 2.7 percent. Europe's Dow Jones Stoxx 600 Index slumped 7.4 percent, and the MSCI Asia Pacific sank 6.4 percent. ``It's very clearly a crash,'' Jim Rogers, chairman of Singapore-based Rogers Holdings, said in a Bloomberg Television interview. ``People are selling everything no matter what the fundamentals. It's forced liquidation.'' Stocks maintained their losses after General Electric Co. posted third-quarter profit that matched analysts' estimates and said it was on track to meet its revised forecast for the year. The shares slipped 81 cents to $18.20 in New York. More than $25 trillion has been erased from global equities in 2008. Central banks from London and Frankfurt to Washington and Hong Kong this week were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money. `Seized Up' The cost of borrowing in dollars for three months jumped to the highest level since Dec. 27, the British Bankers' Association said. The London interbank offered rate, or Libor, that banks charge each other for such loans rose 7 basis points to 4.82 percent, the BBA said today. The Libor-OIS spread, a gauge of cash scarcity among banks, widened 11 basis points to 365 basis points. One basis point is 0.01 percentage point. ``The wheels of commerce have effectively seized up,'' said Kate Schapiro, who oversees $250 million in equities at Sentinel Asset Management in San Francisco. ``Trapped by the fear of losing everything, we're seeing one-sided selling.'' The VStoxx Index, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged as much as 28 percent to 74.54 today, the highest in at least nine years. `Panic Stage' Crude for November delivery fell as much as $5.46, or 6.3 percent, to $81.13 a barrel in New York, headed for its biggest weekly decline since December 2004. Copper slumped in London, set for its worst week in more than two decades. ``We have reached the panic stage,'' said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. ``This is worse than 1987 because then it was largely confined to the stock market, with limited effects on the underlying economy. Fundamentals don't count anymore.'' Russian stock exchanges delayed the opening of trading today and Indonesia extended a two-day halt. Iceland yesterday suspended equity trading today until Oct. 13 after the government seized Kaupthing hf, the country's biggest bank. Russia's government will start buying stocks of domestic companies next week to help support prices, Prime Minister Vladimir Putin said. Consob, Italy's securities-market regulator, banned all short sales on the country's stocks. The Dow Jones Industrial Average fell below 9,000 for the first time since 2003 yesterday as higher borrowing costs and slower consumer spending spurred concern carmakers, insurers and energy companies will be the next victims of the credit crisis. Default, Bankruptcy ``A very dangerous mix has taken place in the money and credit markets and hedge funds are clearly withdrawing flows from equities,'' said Francisco Salvador, director at Venture Finanzas SA in Madrid. ``We are waiting for some rational order to be restored, and very abrupt sell-offs are always followed by abrupt rebounds, but meanwhile we'll see panic.'' The cost of default protection on corporate bonds soared to records on concern the credit crisis will trigger more failures. Credit-default swaps on Europe's benchmark Markit iTraxx Crossover index surged 57 basis points to 730, according to JPMorgan. Credit-market indexes in Australia and Japan also rose after the CDX North America Investment Grade index jumped in New York late yesterday. New City Residence Investment Corp. filed for bankruptcy protection, becoming Japan's first real-estate investment trust failure. Yamato Life Insurance Co. also filed for court protection from creditors in the nation's first bankruptcy in the industry in seven years. Barclays, Morgan Stanley Rio Tinto, the world's third-largest mining company, lost 13 percent to 2,405 pence. E.ON, Germany's biggest utility, sank 14 percent to 24.62 euros. Barclays slipped 15 percent to 206.25 pence. The U.K.'s second-biggest bank said it's ``considering a number of options, including capital raising, relating to the industry-wide commitment.'' U.K. banks as a whole have until the end of the year to add 25 billion pounds ($42 billion) to their reserves under the government's plan, Barclays said in the statement. Morgan Stanley dropped $1.38 to $11.07 after Moody's Investors Service said it may cut the bank's credit rating on concern the financial crisis threatens earnings and investor confidence. Mitsubishi UFJ Financial Group Inc., Japan's biggest bank, lost 8.5 percent to 710 yen. The company is in talks to buy a stake in Morgan Stanley. Valuations The MSCI World Index traded at 10.85 times the current earnings of the companies in the index yesterday, the cheapest since October 1982, according to data from JPMorgan Chase & Co. in London. The MSCI Europe Index traded at 8.61 times profit, the lowest since September 1981, the data show. The S&P 500 traded at 17.39 times earnings, the cheapest since September 2007, based on data compiled by Bloomberg. Nobel Biocare Holding AG tumbled 26 percent to 21.4 francs. Before today, the company expected sales to rise in the ``low single-digits'' while profitability on earnings before interest and taxation was supposed to remain at 2007 levels at a constant exchange rate. Chief Executive Officer Domenico Scala, the former Syngenta AG executive brought in to replace Heliane Canepa in July 2007, said Aug. 11 there were ``encouraging initial signs'' of recovery and that the worst might be over in the U.S. market. To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.

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