The Fed attempted to allay economic fears about the strength of US economy by trimming its key federal fund rate from 4.25 per cent to 3.5 per cent. It also lowered its discount rate — rate at which banks can borrow directly from Fed from 4.75 to 4 per cent. The emergency measure was Federal Reserve’s biggest interest rate cut in since 1984. But key US indexes were nonetheless showing significant losses in early trading with Dow Jones industrial average losing more than 400 points, Nasdaq composite index falling 5 per cent and Standard & Poor’s 500 index down 3.5 per cent.

Panic had gripped world markets after Asian markets suffered another round of heavy losses. Benchmark European shares, which also slumped on Monday, fluctuated uncertainly Tuesday morning, with London and Paris bucking the downward trend in mid-morning trading. By 1455 GMT, London’s FTSE 100 and Paris’ CAC 40 were just shy of their opening prices while Frankfurt’s DAX 30 was down 1.75 per cent. In Asia, Japan’s Nikkei 225 index slid 5.65 per cent Tuesday to close at 12,573.05. Australia’s benchmark S&P/ASX200 index closed down 7.1 per cent at 5,186.8 — the biggest one-day loss for almost 20 years. China’s benchmark Shanghai Composite Index closed down 7.2 per cent at 4,559.75.  In South Korea — where market also closed temporarily — shares fell sharply before Korea Composite Stock Price Index recovered slightly to finish down 4.4 per cent at 1609.02.
Hong Kong’s Hang Seng index dropped 2,061.23 points, or 8.7 per cent, to 21,757.63. The Singapore stock exchange was down 4.5 per cent, and Taiwan’s benchmark Taiex was down 6.6 per cent during trading.