A fresh selloff wave by investors sent world sharemarkets tumbling overnight, eroding gains made earlier in the week as fears of a global recession continued to hit confidence.

In early afternoon trading, Wall Street's main Dow Jones index was down 4% after falls of up to 5% on European sharemarkets.

The falls came as the White House said a global summit to tackle the financial crisis would be held next month. The meeting will debate the reforms needed to avoid another financial crisis and look at the progress being made.

Leaders from the G20 group of nations – the world's leading industrialised countries and major developing nations – will attend.

Sharemarkets

By late morning in New York, the Dow Jones was down 260 points to 8,774.

In London, the FTSE 100 closed 189 points lower or 4.5% at 4041.down 4.5%, with mining firms and banks among the biggest fallers.

France's main Cac 40 index finished the day's trading down 177 points or 5.1% to 3,298, with falls across most sectors of the economy. In Frankfurt, Germany’s benchmark Dax index finished 240 points down or 5% at 4545.

Earlier, Japan’s Nikkei index fell 631.56 points, or 6.8%, to 8,674.69,  its biggest one-day loss in percentage terms since last Thursday, when it fell 11%. This ended three straight sessions of closing higher.

The Korea Composite Stock Price Index closed at 1134.59 points, the lowest finish since early 2005. In other Asian markets, Singapore's benchmark index fell 5% to a four-year low.

India’s main BSE Index closed down 513.49 points, or 4.81%, at 10,169.90 points.

World summit

President George W Bush will host the world's first global financial summit in the US on November 15.
White House spokeswoman Dana Perino said the G20 leaders would "agree on a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors."

Later summits will focus on working out the details of the reforms needed.

Among those expected to attend the summit will be leaders from the G20 group of nations, which includes the G7 group of major industrial economies, as well as key emerging-market countries such as China, India and Brazil.

The head of the International Monetary Fund, the president of the World Bank, the UN secretary general and the chairman of the Financial Stability Forum have also been invited to participate.

UK: Pound plummets

The pound has tumbled almost 3% against the US dollar – its lowest level in five years. Earlier, Bank of England governor Mervyn King had warned that Britain was probably entering its first recession in 16 years.

UK GDP figures, due to be released on Friday, were likely to be in negative territory and the market was steeling itself, analysts said.

In other developments:

• The IMF warned more European banks "may fail" as doubts persisted about the viability of their business models

• Hungary's central bank has raised interest rates by three percentage points to counter a sharp fall in the value of its currency, the forint.

• The IMF said Pakistan had asked it to help deal with its looming balance of payments crisis

• The Argentinian government announced plans to nationalise the country's private pension funds.

• Airline traffic in Europe fell 1.1% in September, the first monthly fall in 25 years