China and Japan called for global cooperation on Friday after a financial market rout signalled fear that Europe's debt crisis could spin out of control and the U.S. economy may slide into another recession.

The comments from Washington's two biggest foreign creditors pointed to growing concern of contagion as Asian stock markets tumbled following Wall Street's steep dive a day earlier.
European markets hit a 14-month low in early trading. 

French President Nicolas Sarkozy will discuss financial markets with German Chancellor Angela Merkel and Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday, Sarkozy's office said in a statement.

In Japan, Finance Minister Yoshihiko Noda said global policymakers needed to confront currency distortions, the debt crises and concerns about the US economy.  

'I agree that these subjects should be discussed,' he told reporters a day after Japan intervened to sell yen. 'Each problem is important, but how to prioritise these issues is something to discuss from here on in.'

Traders said Japan sold yen for a second consecutive day to try to cap the currency's rise, which puts its exporters at a competitive disadvantage. The yen has become a popular safe-haven bet as concerns about the United States and Europe grow.

China Foreign Minister Yang Jiechi said US debt risks were escalating and countries should step up cooperation on global economic risks. Yang, who is visiting Poland, called on the United States to adopt 'responsible' monetary policies and protect the dollar investments of other nations.

The US Federal Reserve holds its next policy-setting meeting on Tuesday, and economists say there is little more it can do to try to spur growth. A flurry of weak economic data and Europe's debt woes have fed fears of a fresh recession, triggering Thursday's sell-off on Wall Street, which was the worst since the global financial crisis.

IHS Global Insight said there was now a 40 percent chance the United States could slip into recession.

The market rout extended into Asia on Friday, where markets skidded as much as 5 percent. With investment options running out, funds are flooding into cash.

Japan and Switzerland are trying to reduce the allure of their markets as safe havens and after gold has more than doubled in price since the global financial crisis, many investors are having second thoughts about seeking refuge in the precious metal.

Bank of New York Mellon Corp said it had been overwhelmed with deposits, prompting it to charge some big customers a fee.

Investors slashed positions after the European Central Bank failed to include Italy and Spain in a fresh round of bond buying, even though yields on their debt shot above 6 percent, the highest level since the euro was launched over a decade ago.

ECB President Jean-Claude Trichet said there was not full support in the central bank for the action, underscoring deep divisions within Europe over how to handle a debt crisis that has forced Greece, Ireland and Portugal to seek bailouts.

Investors worry that Italy and Spain, the euro area's third- and fourth-biggest economies, could be next.

Sarkozy said France, Germany and Spain had talked to Trichet. US officials from the Federal Reserve, the US Treasury and the White House declined to comment on whether they were holding any discussions with European or Asian officials. - Reuters