LONDON (AFP) — Wall Street stocks sank on Friday after sharp losses in Asia and Europe as US talks on a 700-billion-dollar rescue deal that could throw a lifeline to the crisis-ridden financial sector hit an impasse.
Wall Street tumbled 1.19 percent in opening deals as investor jitters also surfaced over the biggest bank failure in US history.
US President George W. Bush made a fresh push Friday to unlock negotiations on a massive financial rescue plan, warning that "we've got a big problem" and stressing "we need a rescue plan."
World equities pulled back after a rally Thursday on hopes of an agreement on a US government plan to buy toxic mortgage-related assets from firms at the heart of the credit crunch.
But those hopes faded after an apparent talks stalemate.
"There are disagreements over aspects of the rescue plan -- but there is no disagreement that something substantial must be done," Bush said one day after unprecedented White House crisis talks failed to yield a breakthrough.
The US Federal Reserve and other major global banks meanwhile pumped billions of dollars into money markets pending a possible deal in Washington to end the worst financial crisis in decades.
In late afternoon European trade, London dropped 2.23 percent, Frankfurt slid 1.80 percent and Paris shed 2.16 percent in value.
In Asia, Tokyo closed down 0.94 percent, Sydney slipped 0.5 percent and Hong Kong lost 1.3 percent.
Pressure on markets increased with the overnight collapse of Washington Mutual, the biggest US bank failure, which was taken over by JPMorgan Chase for 1.9 billion dollars.
Leading Democrats on Friday charged that Republicans were holding up a rescue deal on the rattled financial sector by brandishing an "ambush plan" of their own at the last minute.
"This financial version of 'Deal Or No Deal' is not conducive to restoring badly-needed confidence," said Martin Slaney, head of derivatives at spread betting firm GFT in London.
"If anything, reports of an alternative plan have added to the uncertainty.
"Timing is the key issue here. If a deal hasn't been signed and sealed over the weekend, expect massive market turmoil. Monday will be a bloodbath."
Republican presidential hopeful John McCain stood accused by angry Democrats of sabotaging a deal so as to salvage his electoral fortunes against his opponent in the November 4 election, Barack Obama.
"Wall Street continues to be riveted on the progress of the financial-mortgage plan through Congress," added Fred Dickson at DA Davidson & Co.
"Right now, Wall Street will have to digest the fact that Congress cannot agree on the structure of a rescue plan with time ticking down on the ability of the banking system to obtain, then provide normal levels of funding to maintain normal economic activity."
Global stock markets were buoyed on Thursday by hopes that a US rescue package would be agreed soon.
Barclays Capital analyst David Woo expressed hope that a deal would be reached soon.
"Talks are set to resume today (Friday) and a deal remains likely to be reached, especially since the failure of Washington Mutual has raised the stakes even further," Woo said in a research note to clients.
"But until a rescue package is finalised, some of yesterday's market moves in anticipation of a plan being announced ... are likely to unwind somewhat."
The US financial rescue hold-up also sent oil prices down, traders said. New York's main contract, light sweet crude for November delivery, fell 2.62 dollars to 105.40 dollars per barrel. The contract had risen 2.29 dollars on Thursday as a deal appeared imminent.
New York stocks had also gained 1.82 percent on Thursday as investors had sensed that Congress was on the verge of agreement.
Global markets have been sent into a tailspin since the collapse last week of Wall Street investment giant Lehman Brothers and the US government's rescue of insurance giant AIG.
The crisis claimed another victim on Thursday as the US government closed down Washington Mutual.
The volatile financial environment has also led to global banking giant HSBC cutting 1,100 staff worldwide.
Meanwhile it emerged Friday that Nomura Holdings would pay a token two dollars for the Europe and Middle East operations of bankrupt Wall Street giant Lehman Brothers.
The top Japanese broker would acquire only Lehman's employees in the regions, and not its stocks, bonds or other assets, the Nikkei business daily reported.
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