The images of children killed in a government crackdown on protests are circulating widely among Syrians on YouTube and Al-Jazeera, Facebook and opposition websites. And they are stoking even more fury against a regime the opposition says has lost all legitimacy.

Syria's government tried to blunt the anger with promises Wednesday to investigate the killing of 13-year-old Hamza al-Khatib, whose tortured and mutilated body turned him into a symbol of the Syrian uprising. But protesters deride that and other government concessions, including an amnesty that freed political prisoners on Wednesday and a committee to prepare for national dialogue, as nothing more than a ploy to buy time for President Basher Assad. They say at least 25 children are among more than 1,000 dead, with government crackdowns that increase the toll almost daily.

The deaths of two girls - a 12-year-old killed Saturday when her school bus came under fire, and an 11-year-old shot to death Tuesday while her town was being shelled - appeared certain to inflame tensions. Already, a Syrian opposition page refers to the older girl, Hajar Tayseer al-Khatib, as "the flower of Syria's martyrs."

Military operations in southern and central Syria killed at least 33 people Tuesday and Wednesday, even as the government released hundreds of political prisoners. The government claims the revolt is the work of Islamic extremists and armed gangs.

"We need to find real yield and real returns on these assets. You see bad data, you see Treasurys rally, you see all bonds and all fixed-income rally and then the people who are betting against the US economy start getting bearish on stocks. That's a huge mistake." Stocks extended losses after the manufacturing sector fell below expectations in May and the private sector added only 38,000 jobs during the month.

"Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything," Yastrow said. "We're on the verge of a great, great depression. The [Federal Reserve] knows it."

Russia banned fresh imports from Spain and Germany on Monday, warning that the sanction could soon cover all EU nations if there was still no explanation on the source of the disease and how it is being spread. Researchers are still not able to pinpoint the cause of the outbreak that has hit Germany and other European nations, leaving some 1,500 people infected.

No fatalities or infections have yet been reported in Russia.

The letter will give Boehner an important talking point as he and his fellow House Republicans meet with President Barack Obama at 10 am to discuss the debt limit and other fiscal issues. "An increase in the national debt limit that is not accompanied by significant spending cuts and budget reforms to address our government's spending addiction will harm private-sector job creation in America," the letter said.

Signatories include Nobel laureate Robert Mundell of Columbia University and economists from schools like New York University and Georgetown University, as well as conservative think tanks like the American Enterprise Institute. The Treasury Department has warned that the country could face a default that could push it back into recession and roil markets across the globe if it does not raise the $14.3 trillion debt limit by August 2.

The Treasury has been tapping federal employee pensions and other funds to pay the nation's bills since it reached the current debt limit on May 16. Democrats say they will not consider cuts to popular health benefits until Republicans consider tax increases.

The S&P 500 slipped 30.65 points, or 2.28 percent to end at 1,314.55.

The Nasdaq fell 66.11 points, or 2.33 percent to finish at 2,769.19.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged 18.45 percent, to end at 18.30.

The Dow and S&P have seen the biggest drops since August 11, 2010 and are now on pace for a fifth straight week of losses. The Nasdaq saw its worst first day of the month since October 2009. All 10 key S&P 500 sectors dropped, led by financials, materials and industrials. In addition to the increased risk of restructuring, the agency cited "highly uncertain" growth prospects and missed targets in budget reforms.

In Europe, stocks closed lower amid renewed worries over Greece's debt troubles. Moody's Investors Service downgraded Greece again and said it sees "at least even" chance of a default.

"US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn't revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing. And that's just in the last week and a bit," said Riddell.

Pointing to the dramatic turnaround in the Citigroup "Economic Surprise Index" for the United States, Riddell said the tumble in a matter of months to negative from positive is almost as bad as the situation before the collapse of Lehman Brothers in 2008. "The correlation between the economic surprise index and Treasury yields is very close, so the lesson is that whatever your long term macro views are regarding hyper inflation vs deflation or the risk of the US defaulting, the reality is that if you want to have a view about government bond prices, the best thing you can do is look at the economic data to see what's actually going on," said Riddell.

"And right now, the economic data is suggesting that however measly you may think a 3 percent yield is on a 10-year Treasury, the yield should probably be a fair bit lower given what's going on in the US economy," said Riddell. "You've also got to wonder at what point the markets for risky assets start noticing, too."

"QE3 anybody?" asks Riddell.

The scale of the buying of UK Government debt was revealed in figures published on Wednesday by the Bank of England, which show the increased dependency of the gilt market purchases by the country's major banks. Simon Ward, chief economist at Henderson Global Investors, said THE ACTIONS OF THE BANKS WAS IN EFFECT DELIVERING A SECOND ROUND OF QUANTITATIVE EASING FOR THE ECONOMY.

"The government has been able to continue to fund the large budget deficit at low interest rates in recent months because banks and building societies have stepped up gilt purchases. For the moment, banks are effectively delivering the QE2 stimulus sought by MPC [Monetary Policy Committee] arch-dove Adam Posen," said Mr Ward.

Mr Posen has made frequent calls for the UK to embark on a new round of stimulus for the economy and said last month that the injection of 50 billion pounds would help the recovery.

"Downgrades. QE3 (a third round of quantitative easing) is coming," said Maughn. "The bond markets are all smarter than us, and that's exactly what the bond markets are telling me."

"What's interesting in the bond markets over the last couple of sessions is, you've seen human traders trying to step in and call this turn in the market the same way that equities have done... and they have just been mowed down by the quant funds which are all about leverage, all about momentum and are betting on bond prices going up," added Maughn. Once again, the United States will step up as the marginal buyer of bonds, said Maughn.

"One more big injection of cash into the bond market should take you through at least the summer season into the beginning of the fourth quarter. That cash injection will have the normal inflationary knock-on impact, driving back up commodities, supporting industrial stocks, dragging the financials up with them... I think it's all about the monetary injection trade," Maughn told CNBC.

The mission was given an initial 90 days, which would have run out on 27 June. Aside from Nato members, the talks at alliance headquarters included ambassadors from the five non-Nato countries participating in the Libya campaign; Jordan, Qatar, Sweden, the United Arab Emirates and Morocco.

The decision was practical in part; to accommodate the military planners of the contributing forces. But correspondents say it also aims to send a message to Libyans who have for the past three months been trying to topple Colonel Muammar Gaddafi after more than four decades of autocratic rule. "Nato, our partners, the whole international community, stand with you," said Mr Fogh Rasmussen. "We stand united to make sure that you can shape your own future. And that day is getting closer."

Critics of the Nato mission say it has reached a stalemate. Some of those who went along with the original vote at the UN Security Council - notably Russia - are alarmed that a mission designed to protect civilians from forces loyal to Colonel Gaddafi has drifted towards deposing his regime altogether.

"There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo today in response to a question about price swings. "Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes."

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to US home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman's downfall and the market bottom on March 9, 2009.

"With every crisis comes great opportunity," said Mobius. When markets are crashing, "that's when we're going to be able to invest and do a good job," he said. The freezing of global credit markets caused governments from Washington to Beijing to London to pump more than $3 trillion into the financial system to shore up the global economy. The MSCI AC World gauge surged 99 percent from its March 2009 low through May 27.

The index's reading of 125.41 for the quarter was the lowest since house prices began falling in the summer of 2006. The report "is marked by the confirmation of a double-dip in home prices across much of the nation," said David Blitzer, chairman of the committee that puts together the report. "Home prices continue on their downward spiral with no relief in sight." While the housing market has been a well-known Achilles heel for the recovery, yesterday also saw evidence that the country's manufacturing sector - a robust, albeit small, part of the economy - is slowing.

A reading from the Institute for Supply Management's index that measures the state of manufacturing around Chicago showed a decline to 56.6 last month (May) from 67.5 in April. There were further signs that high food and gas prices are denting the confidence of consumers, whose spending is central to the economy's fortunes. Consumer confidence reached a six-month low in May, according to an index from the Conference Board, as the reading dropped to 60.8 from 66 in April.

The latest slew of readings adds more pressure on the US jobs market to continue its recovery and shore up Americans' confidence. The monthly jobs report for May will be released on Friday. "Weakness in manufacturing also points to a risk of a weaker-than-expected payroll report on Friday and reinforces the general sense the economy is losing steam," said Chris Low, an economist at FTN Financial.

News of the three-year contract emerged as the service undergoes a round of cuts - including the loss of aircraft carrier HMS Ark Royal, Harrier jump-jets, and 5,000 jobs. The ship will patrol the waters around the Falkland Islands and South Atlantic and take on the Navy's Antarctic mission.

The ship has undergone a refit involving the repositioning of the flight deck from the bridge roof to the stern. There has also been the installation of a multi-beam echo sounder survey system, an overhaul of the main engines and gearboxes and the addition of naval insignia. An MoD spokeswoman said: "HMS Protector offers a highly capable and value-for-money solution to fulfil the important ice patrol ship capability while a decision is made on the future of HMS Endurance." The 4,985-ton ship will be crewed by 76 Royal Navy personnel.

"If inflation does not come down in the way that the Bank is suggesting - and I think there is a big risk that is the case - than that is going to have a big knock on effect on the credibility of the bank's commitment to its inflation target." Mr Sentance reached the end of a five-year tenure as a Bank of England policymaker on Tuesday.

Over that period, inflation has been above the Government's 2% target much of the time, with CPI currently standing at 4.5%. For the past 12 months, Mr Sentance has called for a rise in the historically low interest rate in an attempt to control inflation. Two other members of the nine-strong Monetary Policy Committee (MPC) have joined his stance, but so far they have been outvoted by those who want to keep the rate at 0.5%.

China's official purchasing managers' index touched a 9-month low and a private survey hit its lowest mark in 10 months, held back by power shortages and a clamp-down on credit. Business surveys for South Korea, India and Taiwan also showed the pace of manufacturing activity easing. US and European figures later on Wednesday are expected to show a slowdown for May as well.

Some slackening was expected as quake-damaged Japan struggled to churn out parts for the automotive and high-tech industries. Lacklustre growth and consumption in the United States and Europe has also restrained demand. But investors are nervously watching for any evidence that Asia's slowdown is worsening as central bankers tighten credit conditions to try to tame inflation. China's PMI readings were slightly below economists' forecasts, and new orders declined sharply, suggesting more weakness to come.

"The economy has hit a temporary pothole courtesy of the natural disasters this year," said Besa Deda of St George Bank. Australia has not only had to deal with the twin natural disasters. Other factors have also slowed down its economy. The country's growth has been powered by a boom in its resources sector.

As economies like China and India grew, the demand for Australia's resources witnessed a massive surge. However, analysts say the situation is changing."We have been in a honeymoon period for a long time," said Jonathan Barratt of Commodity Broking. "The time has come for realignment. As growth in China and India slows down, the pace of growth in Australia will also be affected," he added.