"I think the situation has deteriorated so much that the choice now - that investors should contemplate - is between global recession and global depression," wrote Stephen Jen, chief currency economist at Morgan Stanley.

The TSX Composite Index and Dow Jones Industrial Average each fell below 10,000 for the first time since Oct. 2004 and July 2005, respectively.

The TSX has since pared its losses and is down 674 points to 10128. At its session lows it was down by 1180, or 11.0%, to 9617.

"The logic is worries of a global recession," said Carlos Leitao, chief strategist and economist at Laurentian Bank. "The extent of the carnage is unreasonable."

Traders are hoping for co-ordinated interest rate cuts from the global central banks.

Leitao said if global central banks were to launch a co-ordinated rate cut, "the objective would be to instill some confidence. It would be done with other liquidity measures. We're not talking about any sort of economic effect, it's strictly confidence."

The extraordinary moves in markets aren't limited to equities:

-The VIX, or volatility index, is at a record high, up 8.15 points to 53.35.

-The Canadian dollar is at its lowest since May 2005 against the USD.

-The U.S. dollar fell the most against the yen in a single session since 1998.

-The euro traded below 1.35 for the first time since Aug. 2007.

-The Mexican peso fell to a record low against the U.S. dollar.

-The Brazilian Bovespa was closed for an hour after declining 15%.

-Canadian two-year yields fell 25 basis points to their lowest since March 2005.

-The Eurostoxx and FTSE 100 posted their worst sessions since 1987.

U.S. two-year yields are down 15.2 bps to 1.43%, with five-year yields down 15.9 bps to 2.47%, 10-year yields down 11.7 bps to 3.49% and 30-year yields down 11.7 bps to 3.97%. The Eurodollar March 09 contract is up 21.5 ticks to 97.74. The yield curve is steeper, with the 10/2-year spread up 3.3 bps to 205.21 bps.

Yields on two-year Canadian government bonds are down 23.9 bps to 2.29%, with five-year yields down 21.6 bps to 2.74%, 10-year yields down 16.2 bps to 3.43% and 30-year yields down 12.1 bps to 3.98%. The December 08 BAX contract is up 23.5 ticks to 97.41.

In Germany, returns on two-year German bonds are down 20.1 bps to 3.08%, with five-year yields down 18.3 bps to 3.42%, 10-year yields down 16.7 bps to 3.76% and 30-year yields down 16.7 bps to 4.20%.

Yields on UK two-year bonds are down 37.2 bps to 3.66%, with five-year yields down 29.1 bps to 3.85%, 10-year yields down 18.9 bps to 4.22% and 30-year yields down 13.3 bps to 4.22%.

The Dow Jones industrial average is down 440 points to 9885, the S&P 500 is down 54 points to 1045 and the Nasdaq is down 105 points to 1842.

European stock markets closed with the Eurostoxx down 202 points to 2525, the UK FTSE 100 down 391 points to 4589 and the German DAX down 410 points to 5387.

The Canadian dollar is down 0.0210 to 0.9063 against the U.S. dollar (1.1037 USD/CAD) and down 5.52 to 91.80 against the yen.

The U.S. dollar is down 4.00 to 101.32 against the yen and the Dollar Index is up 1.068 to 81.381.

The euro is down 0.0265 to 1.3507 against the U.S. dollar, down 0.0002 to 1.4908 against the Canadian dollar, down 0.0002 to 0.7776 against the pound sterling and is lower by 8.22 to 136.86 against the yen.

The pound sterling is down 0.0343 to 1.7372 against the U.S. dollar and down 0.0005 to 1.9174 against the Canadian dollar.

WTI crude oil is down $4.15 to $89.73. The front month gold contract at the Chicago Board of Trade is up $29.70 to $860.90 per ounce.

All data taken at 12:01 p.m. EDT.

By Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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