The headquarters of Bear Stearns (left) and JPMorgan Chase (right) overlook midtown Manhattan in New York in this March 14 file photo. JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at US$236.2 million - or US$2 a share - a stunning collapse for one of the world's largest and most venerable investment banks. - AP

Stock markets world-wide fell Monday, while oil soared and the dollar sank amid fears the end of the credit crisis has not yet been reached in the wake of JPMorgan Chase's acquisition of troubled US investment bank Bear Stearns.

Oil prices reached a record high of US$112 million and the dollar a new low against the euro after JPMorgan said Sunday it would buy Bear Stearns for US$236.2 million (€151.8 million) - or US$2 a share - in stunning collapse for one of the world's largest and most venerable investment banks.

The buyout, at 97 per cent below Bear's trading price Friday, was aimed at averting bankruptcy by Bear Stearns and a spreading crisis of confidence in the global financial system sparked by problems in the US subprime mortgage market.

In the United Kingdom, the Bank of England said it will offer an extra £5 billion - around US$10.1 billion (€6.5 billion) - of reserves into the short-term money market on Monday because of conditions in the market.

The Bank of Japan and Royal Bank of Australia also took similar measures.

IMF WEIGHS IN

Britain's FTSE 100 closed down 3.9 per cent to 5,414.4, while France's CAC-40 Index dropped 3.5 per cent to 4431.0. Germany's DAX Index plunged 4.2 per cent to 6,182.3.

Financials were especially hard hit, with Switzerland's UBS down 13.9 per cent on the day.

Wall Street fell in turbulent trading after the US open.

The Dow was down 162.66, or 1.36 per cent, to 11,788.43 after venturing into positive territory. The Standard & Poor's 500 index fell 29.40, or 2.28 per cent, to 1,258.74, while the Nasdaq composite index fell 54.91, or 2.48 per cent, to 2,157.58.

The head of the International Monetary Fund says the world financial crisis is more serious and more global than a few weeks ago. Dominique Strauss-Kahn says the "economic environment is still worsening".

"Its difficult to call where the bottom is," said Richard Hunter, a broker at Hargreaves Lansdown in London.

"The banks getting hit are those perceived to have exposure to the US subprime market."

In an extraordinarily rare weekend move, the US Federal Reserve took bold action Sunday evening by cutting the discount rate, its lending rate to financial institutions, to 3.25 per cent from 3.5 per cent effective immediately.

The Fed also created another lending facility for big investment banks to secure short-term loans that would be available to big Wall Street firms on Monday.

The Fed was also widely expected to again cut its headline interest rate, the fed funds rate, by as much as a full percentage point to 2.0 per cent at a regular meeting set for today.

Also today, all eyes will turn to Goldman Sachs Group and Lehman Brothers Inc when they report fiscal first-quarter earnings for reassurance that the troubles that led to a run on Bear Stearns, and forced the bank to seek a government-backed rescue, won't occur again.

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.

Japan's benchmark 225 index sank 3.7 per cent to close at 11,787.51 points, its lowest in more than 21/2 years. Hong Kong's Hang Seng index fell 5.2 per cent to finish at 21,084.61.

Across the Asia-Pacific region, all major stock indexes were down, including markets in Australia, China, South Korea, Indonesia and the Philippines.

In currency trading, the dollar plunged as low as 95.72 yen - its lowest since August 1995 - dragged down by a gloomy outlook for the American economy and prospects for lower interest rates.

The euro rose to a record high US$1.5903 before retreating.

Japanese officials quickly called for calm in the currency markets, but did not announce any plans for intervention to shore up the greenback by buying up dollars. The weak dollar erodes profits at the country's key exporters.