Sharp falls in consumer spending in the United States and Germany deepened fears Friday of a global recession as Japan joined a growing list of major central banks cutting key interest rates.
   
As stock markets ended one of their most traumatic months in history with a mixed set of results, evidence abounded of the loss of confidence among businesses and consumers.
   
A report from the US Commerce Department showed American consumers cut spending by 0.3 percent in September, the steepest decline since June 2004.
   
The drop in spending -- which accounts for two-thirds of US economic activity -- came even as incomes rose 0.2 percent.
   
"Although this report is old news ... it underscores that we are in a consumer recession," said John Ryding at RDQ Economics.
   
A similar spending slump was apparent in Germany, Europe's biggest economy, with official figures showing that retail sales plunged by 2.3 percent in September.
   
Wall Street investors focused on lower interest rates and improving credit conditions, shaking off the weak economic news.
   
The Dow Jones Industrial Average jumped 1.57 percent to close at 9,325.01, pushing gains for blue chips for the week to an eye-popping 11 percent but capping a month in which the index lost 14 percent.
   
The Nasdaq composite climbed 1.32 percent and the Standard & Poor's 500 index rose 1.54 percent.
   
"Investors let negative economic news roll right off their backs today, resuming their bargain-hunting ways from a day ago," said Mark Fightmaster at Schaeffer's Investment Research.
   
Intel Corp., the world's biggest computer chipmaker, warned that the economic slowdown may hurt its business but the US firm maintained its fourth-quarter revenue projections.
   
Crude oil prices climbed more than a dollar a barrel, ending a month marked by a record plunge, with the market lifting on the US stocks rally which eased concerns about demand in a slowing global economy.
   
Ukraine moved closer to obtaining an International Monetary Fund for a 16.5 billion dollar (12.8 billion euro) crisis loan after its parliament approved legislation clearing the way. The measures include the creation of a stabilization fund to help ailing banks and government spending cutbacks.
   
Earlier Friday the Bank of Japan cut its key lending rate by 20 basis points to 0.30 percent and forecast that "increased sluggishness in Japan's economic activity will likely remain over the next several quarters."
   
The Japanese economy shrank in the second quarter of this year and a slew of gloomy data since then has reinforced fears of a prolonged downturn.
   
The central bank slashed its economic outlook, predicting tepid growth of 0.1 percent in the current financial year to March and 0.6 percent next year.
   
The Japanese rate cut was slightly smaller than markets had expected and failed to halt a slide in Japanese shares, with Tokyo's Nikkei stock index closing down 5.01 percent as investors took profits after three days of gains.
   
Hong Kong shares closed down 2.5 percent as investors locked in recent sharp gains sparked by hopes that the credit crunch was easing.
   
European stock markets however posted solid gains with the FTSE in London adding 2.0 percent, while in Paris the CAC 40 rose 2.33 percent and the Frankfurt DAX gained 2.44 percent.
   
Central banks from the United States to Asia lowered borrowing costs this week as part of efforts to avert a financial system meltdown.
   
Speculation grew that the European Central Bank and the Bank of England would follow suit next week with fresh rate cuts.
   
The Bank of Spain meanwhile said the Spanish economy, which has been hard hit by a property slump and the global financial crisis, shrank 0.2 percent in the third quarter, the first contraction since 1993.
   
Dutch Finance Minister Wouter Bos cut his country's growth forecast for next year from 1.25 percent closer to zero.
   
Japan's second-largest bank Mizuho Financial Group said it had cut its net profit forecast by more than half for the current year due to turmoil in the global financial markets.
   
Japan's Nissan Motor Co. said it was axing 3,500 jobs worldwide and cut its full-year forecasts by two-thirds as the global economic crisis shakes the auto industry.
   
Japan's third largest automaker, which is controlled by France's Renault, said that profits for the first half slumped by 40.5 percent on a sharp slowdown in the key US market and the soaring value of the yen.
   
US Federal Reserve chairman Ben Bernanke urged the creation of a new system of US home-loan financing as the global financial system reels from problems stemming from the US mortgage sector more than a year ago.
   
Bernanke referred to the huge mortgage finance giants Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) which the government took over in September to avert a financial system meltdown from the housing crisis.
   
"The existing GSE model involves an inherent conflict between the objectives of the companies' private shareholders and the objectives of public policy," he said in a speech videoconferenced to a California symposium.