Fears of a global liquidity crisis intensified on Friday, knocking stocks and high-yielding currencies, while the European Central Bank and Asian authorities acted to calm surging short-term borrowing costs.

What started as trouble with risky U.S. residential mortgages is gripping world financial markets as the fallout hits banks globally, squeezes once ample liquidity and threatens to damage world growth.

World stocks have shed over seven percent since they hit record highs only a month ago. Investors rushed to buy safe-haven government bonds, unwind yen-financed carry trades and moved to scale back expectations for interest rate hikes by some major central banks this year.

Emergency action by central banks -- with the ECB acting for the second time on Friday -- underlined that the risk of a global liquidity crunch was more serious than anticipated.