Central banks in North America and Europe have injected billions into the markets to boost liquidity as jittery investors bailed out of equities.

The European Central Bank lent more than $130 billion US to European financial institutions overnight after banks tightened their lending.

The move followed news that one of the biggest banks in France — BNP Paribas — suspended three securities funds because turmoil in the U.S. mortgage market made it difficult to value their U.S.-based assets.

The U.S. Federal Reserve added $24 billion US in temporary reserves to the banking system, Bloomberg reported.

Bank of Canada intervention 'normal'

The Bank of Canada issued a statement Thursday saying it would "provide liquidity to support the stability of the Canadian financial system" as part of its "normal operational duties."

The central bank said it had intervened Thursday to the tune of $1.455 billion by buying government securities from market participants, and would sell them back the next day.  

"The result is that we are providing cash (or liquidity) to the overnight market," Bank of Canada spokesperson Jeremy Harrison said in an e-mail.     

CIBC World Markets chief economist Jeff Rubin cautioned against reading too much into the Bank of Canada intervention.

Rubin told CBC News no one should take the intervention as a sign that the Canadian economy is weak.  

Stock markets roiled

U.S. and Canadian stock markets opened sharply lower on Thursday and sold off further as the day wore on. The NYSE imposed trading curbs early in the day.

The Dow Jones industrial average lost 387.18 points to close at 13,270.68, a drop of 2.83 per cent.

As investors bailed out of equities, they moved money into U.S. government bonds. That forced up the value of the U.S. dollar and led to a drop of more than $13 US an ounce in gold prices.

The S&P/TSX composite index slid 279.94 points to end the day at 13,478.25, down 2.03 per cent.

The heavily weighted financials index fell 2.7 per cent as investors worried that the subprime credit problems would affect Canadian banks. TD Bank shares fell $2.75 to $68; CIBC stock dropped $3.52 to $89.30.