More U.S. banks turn to Treasury

By Emily Kaiser

WASHINGTON (Reuters) - More U.S. banks lined up for government cash on Monday and the Group of Seven expressed concern that Japan's soaring yen currency posed a threat to financial and economic stability as recession worries spread worldwide.

Stock markets worldwide also tumbled again with key Wall Street indexes hitting a 5-1/2-year low.

Officials in Europe and Asia took emergency actions on Monday to shore up their financial positions. South Korea cut interest rates, Australia intervened in the currency market and the International Monetary Fund moved to help Hungary and Ukraine.

The credit crisis, which began with failing U.S. mortgages, has mushroomed into a worldwide rout as investors dump stocks and commodities, shun higher-risk emerging markets and seek out the safest government bonds and currencies.

Yet, promising signs emerged that government efforts to revive credit markets were beginning to pay off.

London interbank lending rates moderated and the U.S. Federal Reserve set the terms for its program to buy commercial paper, bolstering a market that is vital for funding companies' day-to-day business activities.

In the U.S. housing market, one of the sources of the global crisis, sales of newly constructed single-family homes rose in September and inventories shrank, as builders slashed prices to their lowest level in four years.

But U.S. stocks failed to sustain a midday rally as the Dow Jones industrials and S&P 500 fell to 5-1/2-year lows. Japan's Nikkei tumbled 6.4 percent to its lowest close in 26 years and Europe's FTSEurofirst 300 fell 1.7 percent to a 5-1/2-year closing low.