Amid grim financial news from around the world, stocks saw another tumultuous day, starting with a horrific 9.6 percent slump in Tokyo shares that spilled over to Europe, where London's FTSE plunged 5.0 percent.

"The best word to describe what's going on right now is panic," said Credit Suisse strategist Satoru Ogasawara.

Wall Street followed other exchanges downwards as a wave of panic selling and a meltdown in share prices swept around the world.

The Dow Jones Industrial Average slumped 312.30 points (3.59 percent) to close at 8,378.95, in a volatile session that saw the blue-chip index down as much as 500 points.

The market action capped a week with a drop of more than five percent for the US blue-chip index.

Iceland's government said it had asked for two billion dollars (1.58 billion euros) of support from the International Monetary Fund, the first Western country to do so since 1976, to help emerge from a collapse of its banking sector.

The IMF said it had tentatively agreed to the loan and announced it had set aside more cash to rescue stricken nations.

"The IMF has more than 200 billion dollars of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries," the institution said on its website.

French auto giants PSA Peugeot-Citroen and Renault ordered huge production cuts, while Japan's electronics giant Sony Corp. and Europe's biggest airline Air France-KLM issued profits warnings.

In Britain, official figures confirmed the country was about to enter a recession while Turkey's central bank took action to strengthen bank liquidity and prop up its slumping currency.

Chrysler LLC, the number three US automaker, said it would cut up to 5,000 white-collar jobs by the end of the year as prospects in the sector grow dimmer.

ArcelorMittal, the world's biggest steel producer, shut smelting furnaces on a temporary basis in France, Germany and Belgium, according to union chiefs who met with management.

New figures showed industrial confidence in both France and Italy had fallen to the lowest level since 1993.

There was also bleak data on the jobs front with Spain's unemployment rate jumping to 11.33 percent -- the highest level in more than four years.

The combined impact sent shares tumbling in Asia, Europe and the Americas.

Japan's Nikkei index plunged 9.60 percent, ending below the key 8,000-point level for the first time in more than five years, and Hong Kong fell 8.3 percent.

European shares had lost up to 10 percent by midday trade before mounting a late rally.

French shares still fell 3.54 percent to finish at five-year lows, while Frankfurt's DAX 30 lost 4.96 percent.

Latin America's largest economy Brazil saw its Sao Paulo bourse plunge 6.9 percent Friday.

Mexico's stock exchange closed down 4.61 percent, while Argentina's main market in Buenos Aires sank 7.61 percent to cap a miserable stocks week in the region.

Nouriel Roubini, an economist at New York University who has been warning over the past two years of a deep crisis, said the turmoil is far from over and that "policymakers may soon be forced to close financial markets as the panic selling accelerates."

"Indeed, we have now reached a point where fundamentals and long-term valuation considerations do not matter any more for financial markets," he said.

"What matters now is only flows -- rather than stocks and fundamentals -- and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife."

Technology giant Sony, a bellwether of corporate Japan, saw its shares plunge more than 11 percent after forecasting net profit of 150 billion yen (1.55 billion dollars) for the year to March, down 59 percent on last year.

Air France-KLM suffered a near nine-percent drop in its share price after acknowledging it would be "very difficult" to meet its billion-euro (1.28-billion-dollar) earnings target.

French carmaker PSA Peugeot-Citroen chairman Christian Strieff said he had ordered "massive" production cuts as the group forecast a 17 percent fall in car sales in Western Europe in the fourth quarter.

New figures meanwhile showed Britain's economy shrank by 0.5 percent in the three months to September, compared with the previous quarter, marking the first contraction since 1992.

China, Japan and 11 other Asian nations agreed to set up an 80-billion-dollar fund to fight what former US Federal Reserve chief Alan Greenspan called a "once-in-a-century credit tsunami."

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