The world`s leading economies, led by the United States and the UK, slashed interest rates Wednesday in an emergency move to tackle the global financial crisis after days of record-breaking stock market losses, CNN reported.

Markets reacted cautiously to the development, trimming earlier losses. Wall Street, where good news is needed after a 500-point drop a day earlier, opened down, but quickly climbed into positive territory.

The U.S. Federal Reserve cut its main rate by a half percentage point, with the central banks of China, England, Sweden, Switzerland and the European Central Bank all following suit with other.

The Fed reduced its key rate from 2 percent to 1.5 percent. In Europe, the Bank of England cut its rate by half a point to 4.5 percent, while the European Central Bank dropped its rate to 3.75 percent.

"The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability," the Fed said.

The coordinated measure followed UK`s unveiling of an $87.4 billion rescue package for its battered banking system Wednesday and massive losses during Asian trading that saw Japan`s Nikkei plummet more then 9 percent in its largest single-day decline ever.

There were widespread declines in Asia: Sydney`s All Ordinaries index fell 4.96; Japan`s Nikkei was down to another five-year low at 9.38 percent and Hong Kong`s Hang Seng dropped 8.17 percent -- even as the territory announced it would lower interest rates a full percentage point. 

In Jakarta, a 10.38 percent plunge on the Composite index resulted in markets being slowed to halt the decline. Other falls included South Korea`s KOSPI at 5.81 percent, the Taipei Weighted at 5.76 percent.

"Investors are now afraid that the world is going to enter a depression," said Jesper Koll with Tantallon Capital Research in Tokyo.

Europe appeared to be following suit, with Russia`s major markets off more than 10 percent before trading was suspended -- now a regular occurrence -- and other indices dropping substantially.

London`s FTSE index recorded early losses, with banking shares rallying on news that the British Treasury was making £25 billion available to major financial institutions with another £25 billion available if needed. 

UK Prime Minister Gordon Brown called the move a "bold and far reaching solution" for "extraordinary times," insisting that the measure, which will see taxpayers take a stake in the banks, will "put the British banking system in a sounder footing." 

"This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem," he said.

Finance Minister Alistair Darling said the move would "send a clear message" that it can step in and help the financial industry amid the global economic crisis that exploded following the collapse of the U.S. sub-prime mortgage sector. 

Darling insisted the government, which has already nationalized key mortgage lenders Northern Rock and Bradford & Bingley to ward off collapse, was not seeking to take over the running of the banks.

The scheme, involving Abbey National, Barclays, HBOS, HSBC Bank, Lloyds TSB Bank, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered Bank, comes a day after British banks` stock prices nosedived on investor fears they would not be able to weather the financial storm without help.

On Tuesday European Union finance ministers agreed to raise the minimum guarantee for bank deposits across member states. The move came as Iceland seized control of its second largest bank.

French Finance Minister Christine Lagarde said EU finance ministers had agreed to raise the minimum guarantee of bank deposits to ?50,000 ($68,600) across all EU member states. 

The amount was less than had been expected but Lagarde said the figure was agreed on to enable smaller EU countries and economies to meet the minimum.

Meanwhile, U.S. Federal Reserve Chairman Ben Bernanke said Tuesday that the global financial crisis is likely to restrain the U.S. economy well into 2009.

But he added that the unprecedented steps taken by the U.S. Treasury Department and the Fed were done in time to prevent more expensive and permanent damage to leading financial institutions.

As Bernanke spoke to a meeting of U.S. business leaders, the Federal Reserve announced a new program to help short-term business loans -- taking its closest step yet to lending directly to businesses.

The intervention came as the Treasury Department scrambled to put in place a $700 billion bailout of the financial system enacted on Friday.

Under that program, the Treasury is expected to purchase troubled assets from banks and financial institutions in an effort to spur more lending.

Under the program announced Tuesday morning, the Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. The program is slated to expire in April 2009.