Turnaround: Buyers step in after U.S. stocks crash early

— -- U.S. stocks opened sharply lower Friday, then turned on a dime, erasing their losses, as traders at the New York Stock Exchange cheered.

The Dow Jones industrials, already down 2,271 points in seven sessions, opened down more than 660 before recovering.

The selling took the Dow briefily below the 8,000 level and the Standard & Poor's 500 index below 900.

The major indexes fluctuated sharply as some computer-driven "buy" orders kick in, but investors sold heavily as markets around the world panic because credit markets remain frozen and pose a threat to the global economy.

On the London Stock Exchange, the FTSE 100 index of leading companies was down 7.03% at midday. In Paris, the CAC-40 was down 7.04%. In Frankfurt, the DAX dropped 8.07%. Despite the heavy drops, many of the foreign indexes were off their lows. The FTSE, for instance, opened 10% lower.

Trading on exchanges in Austria, Iceland, Romania, Ukraine was halted when losses mounted quickly. Russian regulators ordered Moscow exchanges, were trading has been suspended for two days, not to open as scheduled.

The pan-European FTSEurofirst 300 index was down 6.8%, putting it on track for its worst week on record.

Frozen credit markets and a loss of confidence in the world's financial system have caused the Dow Jones industrials to drop 21% in just 10 trading days. The blue chip index plunged 678 points Thursday, and is heading to its worst weekly point drop, and one of its biggest weekly percentage drops, since being created 112 years ago.

Going into Friday's session, losses for the year add up to a staggering $8.3 trillion, according to preliminary figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in the U.S.

President Bush is scheduled to make a statement Friday morning about the financial turmoil. But, words are unlikely to stave off another brutal day, with futures pointing to another volatile session.

Investors continue to shift money into safer investments, most of it going into the government bond market. The yield on the three-month Treasury bill slipped to 0.50% from 0.58% late Thursday. That suggests that demand for T-bills, regarded by investors as the safest assets around, remains high.

Longer-term Treasury yields were also in favor. The yield on the benchmark 10-year note fell to 3.73% from 3.76% late Thursday.

Sell-offs in Europe followed huge plunges on exchanges in the United States and across Asia. Stock markets plunged from Seoul to Singapore, and then across Europe, after an overnight sell-off in New York. A key Japan index swan-dived 9.6%.

In Europe, although bank stocks were leading the freefall, shares in nearly every sector of the economy were being sold off.

Driving the plunge: Concerns that a global financial crisis that has frozen lending between banks has now seeped across all sectors signaling a worldwide recession.

"We're not talking about fears of recession — recession is here," said Howard Wheeldon, senior strategist at BGC Partners, a London brokerage house. "The question's now how deep, how protracted it's going to be."

The trigger, Wheeldon said, was word Thursday that the credit rating of General Motors gm could be cut.

That led a massive, 7.4% plunge on Wall Street's Dow Jones industrial average Thursday, with Asian and European investors quickly following suit as markets opened Friday.

"GM is a household name everywhere," Wheeldon said. "If GM is perceived to be in even worse trouble than it was, that's telling the markets this recession is going to be pretty awful."

Gloom from the markets here preceded a meeting by finance ministers and central bankers from the G-7 group of industrialized nations later today in Washington. They gather to try to address the global meltdown in the world's banking systems.

Many nations — including the United States, Britain and Russia — have jumped in in the last two weeks to bail out or prop up their major banks. Many nations haven't, however. And the efforts that have been taken haven't unfrozen lending between banks across the globe. Nor have they opened lending to industry and other businesses.

British Prime Minister Gordon Brown Friday called on other governments to follow Britain's lead and come to the rescue of their struggling banks. Britain this week offered banks a $848 billion bailout. That came on top of a $700 billion U.S. plan signed last week by Bush.

Writing in The Times of London, Brown called for "a global solution" to the financial crisis and said world leaders should gather to devise a plan to restructure financial markets."Because this is a global problem, it requires a global solution," he said.

Tokyo's benchmark Nikkei index plummeted more than 9.6% and finished the week down 24%, twice what it lost during the week of the October 1987 stock market crash. Hong Kong's Hang Seng index lost 7.2%, Seoul's Kospi index nearly 4%, Singapore's Straits Times index more than 8%.

"There's too much uncertainty in the market," said Sherman Chan, economist with Moodys Economy.com in Sydney, Australia. "Confidence is really weak."

The Asian markets took their lead from Wall Street, where to Dow Jones industrial average tumbled 7.3% Thursday to close below 9,000 for the first time in five years. The Dow has now dropped 2,271 points in the last seven trading days — worst 7-day performance ever.

"The U.S. and advanced economies' financial systems are now headed toward a near-term systemic financial meltdown...Day after day, stock markets are in free fall," New York University economist Nouriel Roubini wrote on his website. "We have a severe recession, a severe financial crisis and a severe banking crisis in advanced economies."

Morgan Stanley on Friday cut its estimate for Japan's economic growth this year by half to 0.4% and predicted that the Japanese economy would contract by 1% in 2009.

Stocks are collapsing despite a coordinated effort by central banks around the world to cut interest rates this week and flood markets with liquidity. "People have been speculating for weeks about a coordinated rate cut," Moodys Chan said. "Finally it comes, but too late."

The good news, Chan says: The rate cuts show that central bankers are finally committed to jump-starting stalled economies, instead of tightening credit to fight inflation. But panicked investors are looking for bold movies from policymakers in Europe and the United States, where the crisis began with a meltdown in the U.S. housing market, she said.

"It all goes back to the U.S. and Europe," Chan said. "If they slow, the rest of Asia will suffer... More needs to be done to kick-start the recovery process. We expect more turbulence."

In Japan, Kenji Akasaka, 69, president of a printing company, said he had never seen it this bad in the 40 years he has traded stocks. He said he invests mainly in blue-chips including Toyota and Nintendo — both of which have lost about half their value over the last year.

"I pray before I go to bed that the Dow will recover," said Akasaka, 69, as he scanned a monitor displaying the latest market levels. "I get sleepless, thinking about losses."

Stinson reported from London, Wiseman reported from Hong Kong. Contributing: wire reports