GLOBAL MARKETS-U.S. stocks slide, gold rises on crisis jitters

* Stocks slide amid doubts about global response to crisis

* Fed commercial paper program cuts govt debt safety bid

* Dollar slips against currency basket, yen also falls

* Gold soars more than 3 pct as investors seek safety (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Oct 7 (Reuters) - U.S. stocks cratered on Tuesday and gold prices soared as moves by European and U.S. central bankers to implement emergency measures to shore up the financial system failed to stave off panic that a deep recession is looming.

A more than 500-point decline in the Dow Jones industrial average capped the biggest five-day point loss ever for the blue chip index.

The sharpening stock market losses renewed the bid for safe-haven securities, with the price of U.S. government debt paring or erasing losses.

Federal Reserve Chairman Ben Bernanke, in a dramatic shift to support the battered economy, signaled a readiness to cut interest rates and the Fed stepped forward as a commercial lender of last resort.

But investors sought a concerted global effort to stem the growing financial crisis. Earlier, European shares closed modestly lower on disappointment about the lack of a coordinated push by the world's leading central banks to cut interest rates.

Banking stocks were slammed on both sides of the Atlantic.

The price of spot gold soared 3.4 percent, while in euro terms gold rose to to an all-time high, Reuters data showed, spurred by buying of the traditional safe-haven.

The International Monetary Fund also urged a more coherent and coordinated set of global policies to calm market jitters. The IMF increased its expectations of worldwide credit losses to $1.4 trillion, almost a 50 percent increase from April.

"What's happening in financial markets is quite unprecedented and we are in favor of concerted and coordinated action," Jaime Caruana, director of the IMF's monetary and capital markets division, told reporters in Washington.

The Dow Jones industrial average <.DJI> closed down 146.71 points, or 1.47 percent, at 9,808.79. The Standard & Poor's 500 Index <.SPX> lost 18.10 points, or 1.71 percent, at 1,038.79. The Nasdaq Composite Index <.IXIC> fell 36.83 points, or 1.98 percent, at 1,826.13.

The five-day slide through Tuesday has sliced 1,400 points off the Dow, the biggest cumulative point loss on record for the iconic barometer of U.S. equity markets, Reuters data shows.

"The market can't seem to find a footing, no matter what the government or the Fed tells them," said Linda Duessel, market strategist at Federated Investors in Pittsburgh.

"We've all been shellshocked by the momentum on the downside in this market, and now people are talking about a long and deep recession -- just a month ago many thought a recession could be averted."

The S&P financial index <.GSPF> slid 11.5 percent as shares of Bank of America skidded 26.2 percent a day after the bank announced a plan to raise as much as $10 billion to shore up its capital. Fears that other banks may also need to raise capital weighed on the sector.

Iceland took over its second-largest bank and propped up a battered currency, while Russia negotiated an emergency bailout for Iceland and unveiled an aid package for its own banks.

In other efforts Australia slashed interest rates by 1 percentage point to 6 percent, and Britain considered a massive injection of public funds.

But the individual measures failed to calm investor nerves. Speculation that Japanese bank Mitsubishi UFJ Financial Group <8306.T> would scuttle a deal to buy up to 24.9 percent of Morgan Stanley's voting shares sent Wall Street reeling in mid-afternoon trade.

A Morgan Stanley spokesman later said the deal was on track to close "imminently," helping the bank's shares and Wall Street pare losses briefly, before resuming a relentless downward march.

European shares closed down only modestly, but European banks fell heavily on disappointment about the lack of a coordinated push by leading central banks to cut rates.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.14 percent lower at 1,003.51 points, a day after the index posted its worst one-day percentage fall on record.

"Banks need measures to boost their capital," said Sebastien Barthelemi, an analyst at Louis Capital Markets in Paris. "We need a strong move by governments. Each country has been reacting on its side, but we need something stronger to calm down markets."

Shares in Royal Bank of Scotland and HBOS plunged nearly 40 percent on talk that the British government was mulling a possible bank recapitalization plan.

The Fed's announcement of a new program to buy short-term unsecured debt led investors to unwind the heavy safe-haven buying of government debt that was seen on Monday.

"This is definitely a needed function. With the corporate bonds there has been a lot of speculation that they have been strapped for cash because of the lack of availability of commercial paper," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.

The benchmark 10-year U.S. Treasury note fell 8/32 to yield 3.49 percent, and the 2-year U.S. Treasury note slipped 2/32 to yield 1.47 percent.

One-month Treasury bill rates jumped to yield almost 0.50 percent after the Fed announcement on buying up commercial paper. Short-term bills were heavily bought in recent days, with one-month rates down almost to zero in a rush for the lowest-risk investment.

Investors had dumped risky assets in currency markets in recent days, which sent the dollar to a 13-month peak against the euro and sparking broad gains in the yen.

The dollar fell against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.71 percent at 81.095. Against the yen the dollar fell 0.41 percent at 101.39.

The euro gained 0.87 percent at $1.3605.

In euro terms, gold rose to a new record of 654.22 euros an ounce, up from 635.29 euros late on Monday.

Spot gold prices rose $28.80 to $886.25 an ounce.

Oil prices rose more than $2 as signs that OPEC was considering a supply cut outweighed concerns about the global financial crisis.

U.S. crude settled at $90.06 a barrel, up $2.25, after hitting an eight-month low on Monday as part of a four-day decline. London Brent settled at $84.66 a barrel, up 98 cents.

Overnight in Asia, stocks outside Japan rose for the first time in four days. Japan's Nikkei share average <.N225> finished down 2.2 percent at a five-year low, but MSCI's index of Asia-Pacific stocks outside of Japan <.MIAPJ0000PUS> rose 1.5 percent, rebounding from a low last seen in December 2005. (Reporting by Kristina Cooke, Chris Reese, Wanfeng Zhou and Steven C. Johnson in New York and Atul Prakash, Jan Harvey, Ian Chua, Alex Lawler in London; Writing by Herbert Lash; Editing by Leslie Adler)