March 17 (Bloomberg) -- Stocks fell around the world and the dollar tumbled after the Federal Reserve cut its discount interest rate at an emergency meeting and JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. for $2 a share. Bonds, gold and crude oil climbed.

UBS AG posted its biggest drop in more than nine years in Zurich and Japan's Mitsubishi UFJ Financial Group Inc. fell to the lowest in four years. Europe's Dow Jones Stoxx 600 Index and Japan's Nikkei 225 Stock Average sank to the lowest since 2005, while futures on the Standard & Poor's 500 Index decreased 2 percent on mounting concern that other financial companies will run short of cash.

The dollar slid to record lows against the euro and the Swiss franc and fell to the weakest in 12 years against the yen, helping push gold and crude oil to highs.

``This is a serious crisis,'' said David Goldman, senior portfolio strategist at Asteri Capital in New York and former head of debt research at Banc of America Securities LLC. ``Something is systemically very wrong and we're at a very dangerous moment.''

The Fed lowered the rate on direct loans to commercial banks by 25 basis points to 3.25 percent to help restore confidence in financial markets shaken by the collapse of Bear Stearns and more than $195 billion in asset writedowns and credit losses worldwide. The action coincided with JPMorgan buying Bear Stearns for about $240 million, less than a 10th of its value last week.

Dollar Slump

S&P 500 futures expiring in June slumped 2 percent to 1,266.8 as of 11:50 a.m. in London. The index will slip into a bear market should it drop below 1,252.12, 20 percent lower than its Oct. 9 record and 2.3 percentage points from its current level.

The Stoxx 600 fell 3.5 percent to 293.43, while the MSCI Asia Pacific Index lost 2.4 percent to 132.71. Japan's Nikkei tumbled 3.7 percent to the lowest since August 2005.

Global stock markets lost $2.4 trillion in market value from a peak in October as of March 14. That partly reflects the slump in the U.S. dollar.

The dollar weakened to as low as 95.76 yen, a level not seen since August 1995, from 99.09 on March 14. It dropped to a record low of $1.5903 per euro and an all-time low of 0.9658 Swiss francs. The Australian and New Zealand dollars fell on speculation investors will spurn higher-yielding currencies as financial turmoil deepens.

`Get Out'

``The Fed is throwing the dollar out of the window,'' said Jim Rogers, chairman of Rogers Holdings, in a Bloomberg Television interview from Singapore. ``Everyone listening should get out of the dollar,'' said Rogers, who predicted the start of the commodities rally in 1999.

U.S. Treasury notes rose, causing the 10-year yield to fall 10 basis points to 3.36 percent as traders bet the U.S. central bank will lower its benchmark rate by a full percentage point when it meets tomorrow.

Gold for immediate delivery climbed as much as 3 percent to a record $1,032 an ounce as investors sought a haven against the weakening dollar. Crude oil gained as much as 1.4 percent to a high of $111.80 a barrel.

``The dollar is facing a credibility crisis,'' said Koji Fukaya, a senior currency strategist at the Tokyo unit of Deutsche Bank AG, the world's largest currency trader. ``All the markets are entering a vicious cycle.''

Bank Shares

Financial shares fell, leading declines in the MSCI World Index. UBS, Europe's biggest bank by assets, dropped 10 percent to 25.48 Swiss francs, the most since September 1998. Babcock & Brown Ltd., Australia's second-largest investment bank, plunged 10 percent in Sydney. Mitsubishi UFJ Financial, Japan's biggest lender by market value, slumped 4.8 percent to 789 yen, the lowest since Feb. 10, 2004.

Bear Stearns plunged 90 percent to $2.88 after JPMorgan agreed to buy the bank. JPMorgan added 6 cents to $36.60.

Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, lost 27 percent to $28.60.

``Facilitating a purchase of Bear by JPMorgan is, in effect, more Band-Aids when the patient needs surgery,'' said Ed Rogers, chief executive of Rogers Investment Advisors Y.K., which runs a fund of hedge funds. ``There is a lot more pain to come.''

Default Swaps

The $2 price for Bear Stearns indicates how close the company was to collapse and raises concern that other U.S. financial companies may fail, said Takero Inaizumi, a manager at Mizuho Investors Securities Co. in Tokyo. Bear Stearns shares closed at $30 on March 14, down 47 percent on that day alone.

The cost to protect corporate bonds from default in the Asia-Pacific region surged to records, indicating investors expect more companies to miss debt payments. The benchmark credit-default swap index in Japan gained 37 basis points to 248 basis points, according to Morgan Stanley. The Australian index increased 10.5 basis points to 213 basis points, according to Citigroup Inc.

The so-called TED spread, the difference between what the U.S. government and companies pay for three-month loans, was near the highest this year at 1.61 percentage points, indicating banks are less willing to lend.

Sony, Siemens

Japan's Finance Minister Fukushiro Nukaga, who has the power to intervene in currency markets, said recent moves by the yen are ``excessive.'' The government is not considering any specific action at the moment, he said.

Sony Corp., the world's second-biggest consumer-electronics maker, slumped 5.7 percent to 3,960 yen. Nomura Holdings Inc. lowered its rating on the shares on the view that earnings will be curbed with the yen stronger than 100 versus the dollar.

Siemens AG tumbled 12 percent to 70.35 euros in Frankfurt. Europe's biggest engineering company said earnings in the current quarter will be cut by about 900 million euros ($1.4 billion), citing contract delays and a ``major'' order cancellation.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

Last Updated: March 17, 2008 08:12 EDT