Washington - US consumer confidence plummeted to a new low in October and housing prices plunged by the most on record this year as a financial meltdown appeared more and more likely to plunge the world's largest economy into recession.

The slew of depressing economic news will likely prompt the US Federal Reserve to further cut interest rates at its board meeting on Wednesday. European Central Bank chief Jean Claude Trichet on Monday suggested the bank might make its own rate cut next month.

But US stocks opened higher Tuesday, thanks to gains in Europe and Asia amid some belief that the market may be bottoming out.

The Conference Board's consumer confidence index fell to 38 on the month, compared to 61.4 in September. It marked the lowest reading ever and the third-sharpest monthly drop on record by the New York- based research group. The other two larger drops occurred during the oil crisis of the 1970s.

Major fears included business and labour conditions. The report comes two days before the government offers its initial estimate of third-quarter growth and as the retail industry gears up for its most important few months of the year.

"Consumers are extremely pessimistic," said Lynn Franco, the Conference Board's head of research. "This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season."

Meanwhile, housing prices in the 20 largest US cities fell by 16.6 per cent in August compared to a year earlier, according to the S&P/Case Schiller Index, the largest drop since annual figures were first compiled in 2001. All regions reported lower annual returns for the fifth straight month.

Plunging housing prices since 2006 have sparked a record rate of foreclosures, depressing the value of mortgage-related assets and sending the financial industry to the brink of collapse.

Most advanced economies are facing a recession in the second half of 2008, according to the International Monetary Fund, as the financial crisis has restricted the availability of credit and depressed spending in the wider economy.

The US and European governments are putting in place massive rescue packages that involve taking equity stakes in banks as part of an effort to stabilize the financial system.

But the US Treasury's domestic finance chief warned Tuesday that the government needed to raise an "unprecedented" amount of funds to rescue banks from collapse and keep credit flowing through the economy.

The Treasury could start selling more long term debt to keep its operations flowing smoothly, said Anthony Ryan, the Treasury's undersecretary for domestic finance. The Treasury is in the process of implementing a 700-billion-dollar bail-out approved by Congress earlier this month.

The US central bank is likely to cut rates on Wednesday from their current level of 1.5 per cent, already the lowest since September 2004. dpa