* Global stocks slide as recession fears offset rate cuts
* U.S. Treasury debt prices slide after $16 bln auctions
* Yen hits 3-year high vs euro in risk aversion bidding
* Oil falls more than $3 after U.S. crude inventories rise
* Gold posts strong gains as investors seek safety
(Recasts lead, adds close of European markets)
By Herbert Lash
NEW YORK, Oct 8 (Reuters) - Panic selling again swept global equity markets on Wednesday after a coordinated worldwide cut in interest rates failed to bolster the battered confidence of investors who jumped into gold and other safe-havens.
U.S. stocks were highly volatile, however, briefly turning higher in the early afternoon after falling more than 2 percent, after European shares sank to a near five-year closing low.
Investors at first had warmed to a one-half percentage point cut in interest rates by the U.S. Federal Reserve, the European Central Bank, the Bank of England and other key central banks around the world, the first coordinated move since the Sept. 11, 2001, attacks.
But confidence was short-lived, and the price of government debt, stocks and crude oil swung wildly. Short-dated euro zone government bonds rallied and gold held onto strong gains as investors fled to safe-havens.
The benchmark FTSEurofirst 300 index of top European shares, after falling nearly 8 percent in early trade, recouped most of its losses after the rate cuts only to slide anew.
Keeping investors on edge were credit markets, which remained tight despite the coordinated effort to pry them open.
"Global central banks took on the rate cuts because they wanted to unfreeze the credit market, but credit spreads are still widening," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey.
The yen surged broadly to its highest level in three years against the euro as fears widened that coordinated central bank effort may not be sufficient to thaw frozen credit markets.
"It's essentially too little, too late," said Kathy Lien, director of currency research at GFT Forex in New York. "Liquidity is still at a premium right now and that's weighing on the market's risk appetite."
The euro also tumbled 1.1 percent to 136.16 yen
With financial markets awash with signs that credit is expensive and hard to come by, investors also sold off banking shares on both sides of the Atlantic.
"What's hurting things right now is a crisis in confidence -- people are not willing to lend," said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois. "It's not that the rate terms are not favorable, they're just scared to death that they'll never get the money back."
Alcoa Inc
At 1:30 p.m., the Dow Jones industrial average <.DJI> was down 64.20 points, or 0.68 percent, at 9,382.91. The Standard & Poor's 500 Index <.SPX> was down 5.62 points, or 0.56 percent, at 990.61. The Nasdaq Composite Index <.IXIC> was down 2.34 points, or 0.13 percent, at 1,752.54.
The S&P financial index <.GSPF> fell 0.60 percent.
In Europe, the FTSEurofirst 300 <.FTEU3> closed down 6.3 percent at 940.78 points, its lowest close since December 2003. The index has lost 13.6 percent this week.
The banking sector took the most points off the index, with
Anglo Irish Bank
Some British financial shares rose, however, after Britain announced a multi-billion pound rescue package for banks that included plans to inject up to 50 billion pounds of government money into the country's biggest operators.
Despite the flight to safety, U.S. Treasury prices fell after two auctions totaling $16 billion.
The benchmark 10-year U.S. Treasury note
The dollar fell against major currencies, with the U.S. Dollar Index <.DXY> off 0.55 percent at 80.674.
The euro
Oil prices fell on worries that demand will fall due to a weakening global economy and on rising U.S. inventories.
U.S. light sweet crude oil
Spot gold prices
How much the rate cuts will allow troubled banks to improve their balance sheets and keep businesses humming was unclear.
In Asia, the Nikkei plunged 9.4 percent in its biggest one-day drop since the 1987 stock market crash, on fears of a global recession.
The MSCI Asia-Pacific index of stocks outside Japan <.MIAPJ0000PUS> tumbled 7 percent, dragged down by the global financial panic.
The International Monetary Fund said the financial upheaval would exact a heavy economic toll as markets wrestle with a crisis of confidence and global credit is choked off. It said the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.
The IMF slashed its 2009 forecast for world growth to 3.0 percent from a July projection of 3.9 percent, and warned that a recovery from the worst financial crisis since the 1930s would be unusually slow.
Losses on global stock markets have been huge this year, especially since mid-September when the collapse of U.S. investment bank Lehman Brothers sparked heavy selling.
Since global markets peaked about 12 months ago, more than $12.4 trillion in stock market wealth across the world has been wiped out, according to MSCI's main world equity index.
More than one-third of that loss -- about $4.6 trillion -- has occurred since Lehman's bankruptcy. (Reporting by Ellis Mnyandu, Chris Reese, Wanfeng Zhou and Gertrude Chavez-Dreyfuss in New York; Lesley Wroughton in Washington and Joe Brock and Humeyra Pamuk in London; Writing by Herbert Lash; Editing by Leslie Adler)