European leaders were set on Friday to demand an overhaul of the rules of global finance after the International Monetary Fund (IMF) said that the economies of rich nations would shrink next year.
South Korea cut interest rates for the third time in a month to shore up its economy after deep rate cuts in Britain and continental Europe on Thursday failed to calm panicky investors worried about the credit crisis turning into a deep downturn.
Central bank action could not halt a slide in global stock markets. It was overshadowed by the IMF warning that developed economies in 2009 faced their first full-year contraction since World War Two.
"Increasingly, the signs point to a deep and synchronised global recession that began last quarter and has gathered momentum," said Bruce Kasman, an economist at JPMorgan Chase in New York.
The IMF cut its overall 2009 global growth forecast to 2.2 percent from 3 percent, a prediction made only last month, and urged governments to ramp up spending to support their economies.
Asian stocks fell for a third day and commodity prices also tumbled, as layoffs and corporate profit warnings piled up.
Shares in Europe gained one percent in early trade.
EU heads of government will meet in Brussels on Friday to discuss Europe's proposals ahead of the Nov.14-15 summit of global powers on a financial crisis which has its origins in the collapse of the U.S. housing market.
The Europeans want the Washington summit to herald root-and-branch change. U.S. President George W. Bush's outgoing administration has taken a more cautious stance.
"We expect Washington to produce a clear time schedule, a clear mandate ...We know that the readiness to overhaul the international financial architecture will diminish as countries begin to feel better," a German government official said.
A spokesman for British Prime Minister Gordon Brown, who like French President Nicolas Sarkozy has urged an overhaul of the world financial bodies established after World War Two, said that reversing the global slump was vital.
"It is not the right time for short-term cuts in investment and public spending," the spokesman said.
"There is now an emerging consensus across the developed world of the need to use fiscal policy in tandem with economic policy to support economic growth, and this is a point that the prime minister will be making (in Brussels)."
Later on Friday, Barack Obama is due to hold his first news conference since winning the U.S presidency after a meeting with his economic team, as the world awaits signs of how he might tackle the economic crisis.
Markets are particularly keen to learn who will become Obama's Treasury secretary, but it was not clear when he might announce his choice.
Among those seen as leading candidates for the job are Timothy Geithner, president of the Federal Reserve Bank of New York; former Treasury Secretary Lawrence Summers; and former Federal Reserve Board Chairman Paul Volcker.
Investors also looked anxiously ahead to Friday's U.S. jobs payroll report for October, which is expected to underscore the weakening economy.
According to the median of a Reuters forecast of 87 economists, another 200,000 non-farm jobs were shed last month, which would be the largest monthly cut in jobs since March 2003.
In Asia, Toyota saw its stock overwhelmed with sell orders and down as much as 12 percent, after it slashed its profit forecast. The carmaker's stock fell 10 percent on Thursday.
Its woes illustrate how the financial crisis, which started when the housing boom in the United States turned sour 15 months ago, has spread to the consumer markets.
As investors were bracing for dismal quarterly results from General Motors and Ford on Friday, industry sources said their chief executives sought a $50 billion federal bailout to survive a crunch blamed on a worsening economy and the "near collapse" in demand for cars.
South Korea's moderate interest rate cut of 25 basis points to 4.00 percent, the lowest since early June 2006, was in line with the consensus forecast in a Reuters poll.
But it disappointed some investors.
"The central bank may have missed a good chance to cut it deeply," said Park Jong-youn, a fixed-income analyst at Woori Investment & Securities.
With inflationary pressures easing further as oil briefly fell below $60 a barrel on Friday, its lowest since March 2007, central banks' focus is now on boosting growth.
The Bank of England shocked markets by cutting rates by 150 basis points to 3 percent, the lowest level in more than half a century, to tackle Britain's slumping housing market, a decline in manufacturing and rising unemployment.
The European Central Bank met market expectations by reducing its benchmark interest rate for 15 nations sharing the euro by 0.5 percentage point to 3.25 percent.