North American stock markets got off to a promising start Thursday but it was short-lived as nervous investors drove key indexes in both Toronto and New York to triple-digit losses by the end of the trading day.

The TSX composite index closed down 456 points at 9,600 on Thursday. (Robin Rowland/CBC)

The TSX composite index closed down 456 points at 9,600, a 4.5 per cent decline, after jumping 300 points soon after the market opened. In New York, the Dow Jones lost 679 points or 7.3 per cent, while the Nasdaq shed 95 points or 5.5 per cent.

The drop brought the Dow to its lowest level in five years. As the White House strove to assure Americans the government was taking decisive action to stabilize the ailing financial system, it announced U.S. President George W. Bush would make a statement on the economy Friday.

He is not expected to announce any new policy decisions, White House press secretary Dana Perino said.

"He will assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system," Perino said. "The Treasury Department, the Federal Reserve and the FDIC [Federal Deposit Insurance Corp.] all have the necessary tools to address the problems we are facing.

"The Treasury Department is moving quickly to use new tools to improve liquidity, which is the root cause of this problem," she said. "Americans should be confident that every effort is being taken to stabilize our markets."

Finance ministers from Canada, Britain, France, Germany, Italy, Japan and the U.S. have been invited to meet with Bush at the White House Saturday to discuss the global financial crisis.

Stock markets in other parts of the world also remained volatile Thursday as investors reacted to interest-rate cuts by central banks and concerns grew in some quarters that the financial crisis could lead to a global recession.

Markets in Europe closed down after spending most of the day in positive territory. Britain's FTSE 100 lost 1.21 per cent, Germany's Dax dropped 2.53 per cent and France's CAC 40 lost 1.55 per cent.

A woman glances at an electronic board on King Street in Toronto on Thursday that shows a sharp drop at the New York Stock Exchange. (Robin Rowland/CBC)

In Asia, Hong Kong's Hang Seng index jumped 3.31 per cent, South Korea's key index rose 0.6 per cent while Japan's Nikkei index slipped 0.5 per cent in a day of volatile trading, to close at its lowest level in five years.

Hong Kong, South Korea and Taiwan followed the lead of other central banks by cutting their key interest rates Thursday.

Iceland moves to control largest bank

Iceland's government moved to take control of the country's largest bank after Prime Minister Geir H. Haarde warned that Iceland was at risk of "national bankruptcy."

Iceland had already lent $745 million to the Kaupthing bank to help it stay afloat. It now controls the nation's three major banks, having previously taken over Landsbanki and Glitnir.

In Ireland, Finance Minister Brian Lenihan announced that the government was extending its guarantee of bank deposits to cover five foreign-owned institutions — Northern Ireland's Ulster Bank, Britain's First Active and Halifax Bank of Scotland, Belgium's IIB Bank and Postbank, and Benelux-based Fortis bank.

Lenihan said he was acting because the banks have "a significant and broad-based footprint in the domestic economy." Coverage will be limited to deposits at their operations in Iceland.

In Ottawa, Finance Minister Jim Flaherty sought to reassure Canadians that the financial system was sound, saying he has "absolutely no concern" about the health of Canada's financial institutions.

However, Flaherty said the money market squeeze has spilled into Canada and is starting to restrict the ability of households and businesses to obtain loans for mortgages, automobiles and investments.

He said the government is looking at a range of measures that would increase liquidity in the markets to ensure Canadian consumers and businesses can continue to borrow.

With files from the Associated Press