Recession looms despite interventions

By Claudia Parsons

NEW YORK (Reuters) - Government steps to shore up the banking system and unfreeze credit markets showed some signs of progress on Thursday, but grim news from major economies reinforced fears of recession and hammered global markets.

U.S. stocks bucked the global trend to end higher, clawing back some of Wednesday's steep losses despite news of layoffs in the auto-industry, a slowdown in industrial production and more warnings about the state of the economy.

Banks, which are at the heart of the crisis, were in the spotlight again.

Switzerland's top two banks, UBS AG and Credit Suisse Group AG (CS), took emergency measures to shore up their finances. In the United States Merrill Lynch and Citigroup reported heavy losses on bad loans and tough-to-sell mortgage securities.

In a sign of easing strains in the credit markets, rates that banks charge each other for loans mostly fell in response to radical moves by central banks to provide liquidity, bolster banks and loosen credit lines to institutions needing cash.

However, U.S. financial institutions borrowed record amounts of cash from the Federal Reserve in the latest week, according to Fed data released on Thursday, indicating that credit conditions in the United States remain constrained.

European Union leaders vowed to shield their industries from the global crisis and pushed plans for a global summit to overhaul the world financial system.

Asian, European and emerging market stock markets took another battering on Thursday. Japan's Nikkei fell 11 percent in its worst one-day drop since the stock market crash of October 1987, oil fell more than 6 percent to below $70 a barrel, and European shares lost 5 percent.