Recovery concerns

The slump in consumer confidence was larger than expected, and compares with a reading of 76.4 taken at the same time last year.

The board's expectations' index, which examines US consumers' outlook over the next six months, also slumped to 27.5 from 42.5, showing marked fears from consumers that continued job losses and market volatility were affecting the economy.

Speaking to the senate banking committee, Bernanke said the US economy is likely to keep shrinking in the first six months of 2009.

He said he hoped the current US recession would end this year, but said significant risks and economic recovery would hinge on the success of the Federal Reserve and the Obama administration in getting credit and financial markets working again.

"Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,'' Bernanke said.

Cash plea

The Obama administration is hoping its $787bn stimulus package of increased government spending and tax cuts will turn the US economy around, along with the revamped $700bn financial bailout package passed last year under the former administration of George Bush.

Housing, credit and financial crises have plunged the US economy into its worst economic crisis since the Great Depression of the 1930s.

The US insurance giant AIG, which has already received about $150bn of US government aid, has reportedly asked for more aid and was preparing for a fourth-quarter loss of roughly $60 billion.

US stocks remained slightly higher on Tuesday, a day after hitting 12-year lows, with the Dow Jones Industrial Index opening up 15 points at 7,130.

Concerns over the global economy led to stock markets falling in Asia and Europe on Tuesday, with London's FTSE 100 index sliding by 0.36 per cent.

Markets dive

In Paris, the CAC 40 dropped one per cent as Frankfurt's DAX 30 dipped 0.37 per cent.

Japan's benchmark Nikkei share average closed 1.5 per cent lower while Hong Kong's Hang Seng lost nearly four per cent and South Korea's Kospi more than three per cent.

Other markets across the region also dived after US stocks fell more than three per cent - recording their lowest close since 1997.

Singapore, Taiwan and India's markets dropped around one per cent each with Shanghai recording a fall of more than three per cent.