Despite pledges from world leaders, global markets continue to fall

LONDON — Pledges of action by world leaders, and a radical move by the European Central Bank to ease fears of an escalating debt crisis in the region by buying up the troubled debt of Italy and Spain, did not halt another day of bitter losses in global stock markets.

The ECB signaled after an emergency meeting Sunday that that it would invest in European bond markets in a bid to prop up hard-hit Italy and Spain, Europe’s fourth- and fifth-largest economies, which are in the midst of a worsening financial crisis.

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10-year government bond yields

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The United States has lost its coveted top AAA credit rating. Credit rating agency Standard & Poor's has downgraded the nation's rating for the first time since the U.S. won the top ranking in 1917. (Aug. 5)

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• World leaders scramble for stability
• Markets plunge as global economic fears rise
• ECB moves to prop up debt of Italy, Spain

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Signs of that intervention on Monday — as well as a vow by the G-7 nations to take “all necessary measures to support financial stability and growth” — buoyed the bonds of both nations, sharply driving down their borrowing costs in midday European trading.

But on the first day of global trade following a downgrade of U.S. debt by Standard & Poors, broader sentiment remained grim, with even stock markets in Milan and Madrid giving back their early gains and falling into negative territory.

London’s Key FTSE 100 index was down 1.7 percent, while the Dax in Frankfurt was down 2.4 percent.

Asian markets sank, with Japan’s Nikkei closing at its lowest mark since mid-March. South Korea’s exchange halted traded briefly amid steep losses and ultimately closed down 3.82 percent.

In debt-ridden Greece, already the subject of a European bailout, shares on the Athens Stock Exchange were plunging to levels not seen since the mid-1990s, the Associated Press reported.

U.S. stocks fell sharply in early trading.

U.S. and European officials are trying to calm anxiety about the global economy as the U.S. downgrade and European debt problems threaten to feed on each other, weighing on markets and a limp economy on both sides of the Atlantic.

After an emergency conference call Sunday involving Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke, officials from the world’s top seven economies expressed support for actions taken by both the United States and Europe.

The officials committed “to taking coordinated action where needed, to ensuring liquidity, and to supporting financial market functioning, financial stability and economic growth.” They said they would particularly act to curb volatility in currency trading.

The emergency moves evoked memories of the response to the financial crisis in 2008 and portended intense volatility in global financial markets this week. The dollar fell over the weekend while gold soared.

Amid this uncertainty, the Obama administration announced that Geithner, the president’s longest-serving economic adviser, would remain in his post through fall 2012. Geithner had told President Obama that he was ready to step down after leaders reached an agreement to raise the debt ceiling last week, but the president asked him to stay.

In announcing the downgrade, S&P cited the U.S. debt burden and political paralysis in its decision to remove the nation’s sterling AAA rating. The Obama administration blasted the decision, saying it was based on faulty logic and math, while acknowledging that Washington must do more to tame its debt.