WASHINGTON/NEW YORK (Reuters) - Finance chiefs of the world’s major economies pledged on Friday to take decisive action and work together to stem the escalating financial crisis after another day of gut-wrenching drops on world markets.
Reeling from the loss of trillions of dollars of wealth, investors worldwide had pinned their hopes on decisive action from the Group of Seven major industrialized nations. U.S. stocks pared massive losses in a late recovery.
After markets closed, the Group of Seven major industrialized nations said the situation called for “urgent and exceptional action,” and pledged to take all necessary steps to unfreeze credit and money markets.
They said that would include using all tools to prevent systemically important institutions from failure and ensuring that banks can raise capital from public and private sources.
Concerted interest-rate cuts by major central banks around the world, individual liquidity injections, a $700 billion U.S. bailout plan, and government plans in Europe to take equity stakes in banks have so far failed to restore investor confidence.
“It all depends on whether the governments can get a grip on this,” said Axel Merk, portfolio manager at Merk Hard Currency Fund in Palo Alto, California.
Investors, leading nations and the International Monetary Fund had all clamored for a united front as nose-diving share prices suspended trade on bourses from Indonesia to Austria and emerging market currencies crumbled.
U.S. stocks crawled back in the final hour of trade with the Dow trimming losses to 1.5 percent on a day in which it traded in a 1,000-point range. The eighth straight day of losses left the Dow down 18 percent for the week.
U.S. stocks have lost $2.4 trillion this week and $8.4 trillion in the past year, according to the Dow Jones Wilshire 5000.
The rally only partially resurrected the shares of Morgan Stanley and Goldman Sachs, pummeled when credit rating agency Moody’s Investors Service said it might cut their ratings, reviving concerns about the viability of their banking models.
Additional reporting by Reuters bureaus around the world; Editing by Brian Moss, Steve Orlofsky, Toni Reinhold, Leslie Adler