LONDON, Oct 8, 2008 (AFP) - Global stock markets suffered another vicious sell-off on Wednesday in extremely volatile trade, as investors brushed off a coordinated round of interest rate cuts across the globe.

After a calamitous day in Asia, Wall Street plunged at the open before rebounding slightly amid caution over the international bid to unblock frozen credit markets.

Frankfurt, London and Paris all tumbled by more than 4.0 percent as initial optimism over the rate cuts evaporated.

Major central banks launched an exceptional joint effort to battle the global financial crisis on Wednesday, simultaneously slashing interest rates on three continents in a move aimed at rescuing the flagging global economy.

The US Federal Reserve, European Central Bank, Bank of England and peers in Canada, Sweden and Switzerland slashed key rates by a half percentage point, sending their strongest signal of support since just after the September 11, 2001 terror attacks in the US.

'We are not out of the woods yet,' warned City Index market strategist Joshua Raymond. 'We will have to see whether this has any long lasting effect on confidence.'

'What is good to see is the central banks making a co-ordinated and proactive effort to combat what is now a global economic problem. The fear is that this should have come about a week ago.'

New York's Dow Jones Industrial Average rose 0.95 percent to 9,536.39 points around 1350 GMT, after plummeting 149.34 points in the first three minutes of trade.

'The big question now is, will the buying interest be sustained or will it be seen as another opportunity to sell into strength, fueled by the thinking that the rate cut still isn't enough to change the market tone?' asked Patrick O'Hare, analyst at Briefing.com.

In a turbulent day in Asia Tokyo fell 9.38 percent by the close, the biggest loss since October 1987 in the wake of the US stock market crash.

The FTSE also sank earlier Wednesday after Britain's government had announced a 50-billion-pound part-nationalisation of the country's main banks as part of an emergency bailout package worth a total of 500 billion pounds.

Following the emergency round of rate cuts, the London FTSE lost 4.77 percent, Frankfurt fell 4.39 percent and Paris was down 4.59 percent in late afternoon European deals.

Arab stock markets tumbled for the fourth day running on Wednesday but the Saudi bourse, the region's largest, rebounded strongly after a coordinated international rate cut.

The Bank of Japan said it supported the rate cuts but was not participating as its benchmark rate was already low.

The British government said it would use 50 billion pounds (64 billion euros, 87 billion dollars) of taxpayers' money to buy preferential shares in the banks, in a bid to prevent a collapse of the banking system.

The three-part package also makes available 200 billion pounds in short-term loans and the government will issue 250 billion pounds to guarantee loans between banks.

Britain's measures came after the United States last month announced its own 700-billion-dollar bailout of ailing Wall Street banks.

In Asia, Japanese Prime Minister Taro Aso he was stupefied by the Tokyo market's slide, adding he sensed 'huge fears' in the public.

Hong Kong ended down 8.2 percent at its lowest level in more than two years.

The bloodbath forced some countries to take dramatic steps to try to stem the selling. Indonesia suspended trading on its market after stocks plunged more than 10 percent.

Trading was later frozen on Russia's two main stock markets after plunges of more than 11 percent on opening.

Banking shares were extremely volatile, switching from losses to massive gains and vice-versa. British bank HBOS soared 51 percent after tumbling 41.5 percent on Tuesday.

Sydney closed down 5.0 percent on Wednesday, Seoul lost 5.81 percent and Shanghai shed 3.04 percent as the crisis sparked by a US housing slump continued to send shockwaves around the globe.

Wall Street's Dow Jones index sank more than 500 points or five percent on Tuesday to a five-year closing low.

'No one knows for certain now what they can rely on,' said Hironobu Hagi, deputy general manager at capital market division of Shinsei Bank.

'We're seeing panic selling. Once players see a sign of selling, everybody tries to jump on the bandwagon,' he said.

Global central banks meanwhile pumped billions of extra dollars into the financial system while the Hong Kong Monetary Authority said it would cut its key interest rate by 100 basis points from Thursday.

The US Federal Reserve said Tuesday that it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and fight off the liquidity crunch triggered by a wave of US mortgage defaults.