The 1.0 percent fall in U.S. consumer prices in October reflected a sharply weakening economy and raised the prospect of deflation if consumer demand fails to pick up. Construction starts on U.S. homes also hit a record low in October.

"It's a reflection of very weak demand," said Carl Lantz, interest rate strategist at Credit Suisse in New York. "The fourth quarter is probably going to be the most intense period of economic weakness."

European Central Bank President Jean-Claude Trichet said the financial crisis -- sparked by a U.S. housing crash and big bank losses that followed -- was the first time since World War Two that the industrial world's finances have been at stake.

The crisis could be solved by central banks and governments in concert, with an important role for the private sector, Trichet told Sky Television late on Tuesday, but said, "It will take time."

The Bank of England seemed to share his view. Minutes of its last meeting, when it cut interest rates by a shock 1.5 percentage points, showed it had considered an even bigger reduction to tackle the recession.

Thousands of people rioted on Monday in China's Gansu province and the China Daily quoted Public Security Minister Meng Jianzhu as saying police "should be fully aware of the challenge brought by the global financial crisis and try their best to maintain social stability."

Although the Gansu violence was triggered by a plan to resettle residents in a region hit by earthquakes, it followed taxi strikes and labor protests in areas reliant on Western demand for Chinese exports.

IMA Asia, a business intelligence provider, said it had raised its political risk rating for China from low to medium.

"We are concerned about the potential for unrest within a massive pool of migrant workers who face lay-offs in the construction and export manufacturing sectors," it said.

U.S. CARMAKERS PLEAD

Wall street stocks were little changed in early trading, as gains in energy and commodity shares offset diminishing prospects for a government rescue of the U.S. auto industry.

Hit hard by low consumer demand due to the slumping global economy, the "Big Three" U.S. carmakers warned the U.S. Senate Banking Committee on Tuesday of a "catastrophic collapse" in the U.S. economy if no help was forthcoming.

The executives faced stiff opposition from some Republican lawmakers and the White House as they made their case for a $25 billion aid package for a second day on Wednesday.

Auto firms in Japan and Europe are also under pressure.

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