BOCA RATON, Fla. (Reuters) - U.S. presidential candidates competed on Tuesday to look strong on the economy after an interest rate cut by the Federal Reserve and shaky markets worldwide exacerbated fears of a looming U.S. recession.
U.S. stocks fell and global equities markets reeled on fears that a deteriorating U.S. economy would have a domino effect on other regions, though the Fed's interest rate cut sparked a rebound in European shares and helped U.S. stocks pare losses.
"As we saw overnight, this is a global economic crisis," Democratic Sen. Hillary Clinton of New York told reporters in Washington, fresh from a debate that highlighted tensions between her and rival Sen. Barack Obama of Illinois.
Clinton, who has portrayed herself as the best prepared candidate to shepherd the U.S. economy, called on President George W. Bush to do more to help families that have been hit by the U.S. mortgage crisis.
Republican Sen. John McCain of Arizona, eager to build on his momentum after winning the party's nominating contest in South Carolina last weekend, touted his economic plans and welcomed the drop in interest rates from the Fed.
"I am concerned about financial market events, but with the right leadership and pro-growth policies the economy can weather this upheaval," he said in a statement.
"The role of the Federal Reserve is to ensure that our financial markets are well-functioning and to support economic growth. I am confident that the action taken this morning to cut two key rates will support these goals."
The U.S. central bank cut interest rates by a hefty three-quarters of a percentage point in an emergency bid to lend support to the U.S. economy, the largest single shift in interest rates since November 1994. The Fed also lowered the discount rate it charges on direct loans to banks.
In Florida, Republican Mitt Romney, who has emphasized the business background he gained before entering politics, called U.S. markets "distressed" and raised the possibility of a solvency crisis at U.S. banks.
"We have to make sure these institutions have sufficient capital," Romney told Reuters after a speech to Florida's Republican Jewish Coalition. The former Massachusetts governor, who made a fortune as a venture capitalist, said he saw a worrying trend in growing numbers of U.S. banks seeking capital offshore following a collapse in the housing market.
Romney is in a close four-way race in Florida, where the primary on Jan. 29 is the next test in the state-by-state battles to choose the Republican candidate for November's presidential election.
The campaign's economic focus came after a heated debate on Monday between the top Democratic candidates, with Obama and Clinton trading personal barbs while third-place contender John Edwards emphasized his plans to reduce poverty. The three face off in the South Carolina Democratic contest on Saturday.
Obama said Clinton had changed her stance on a stimulus package for the economy, a bankruptcy bill and on trade agreements.
"This is exactly the kind of politics we can't afford right now. Not when the stakes are this high. Not when the economy is this fragile," he said during an appearance at Furman University in Greenville, South Carolina.
"We can't afford a president whose positions change with the politics of the moment," he said.
(Additional reporting by Ellen Wulfhorst in Washington, John Whitesides in South Carolina)