FTSE slumps as global recession fears rock world markets » Central Government » 24dash.com

The FTSE 100 Index slumped by as much as 10% today as global recession fears rocked world markets.

London's slide below the 4000 barrier came after similar heavy losses for investors in Asia and on Wall Street last night.

The Footsie later steadied, but at 5% lower at 4096 it was still almost 18% down on the top flight's position at the start of the week.

Today's bloodbath extended across Europe, with France's CAC 40 plunging 7% and the Dax in Germany down by 8%.

Overnight losses in Asia saw Japan's benchmark Nikkei 225 index close almost 10% lower - down 881 points in its worst session since Black Monday in 1987.

And America's Dow Jones Industrial Average closed below 9000 for the first time since 2003.

Henk Potts, director of investment strategy at Barclays Stockbrokers, said: "I think it's very close to panic. We are drowning in a sea of red numbers and fundamentals have gone out the window.

"Investors are concerned about the exacerbation of the credit crunch and the gloomy forecasts for economic growth.

"The reality is that most investors have been spooked by the sheer pressure that the credit crunch is putting on the global economy."

Today's early session fall marked the first time the FTSE 100 has been below the 4000 barrier since 2003.

Coordinated interest rate cuts across the world and this week's efforts by the UK Government to bolster UK banks failed to reassure panicked investors.

Banking stocks were deep in the red once more as the Treasury's £50 billion part-nationalisation plans did little to ease concerns surrounding the sector.

Halifax Bank of Scotland was down 18%, with its merger partner Lloyds TSB falling 9% and Barclays also suffering a 7% decline.

Insurers were taking a hammering as well after a brief respite yesterday.

Falls in the sector were compounded by news that Japanese firm Yamato Life Insurance Co had collapsed - the first financial firm in Japan to fail due to losses linked to the global financial crisis.

In London, Standard Life shares dropped 10%, Friends Provident fell 9% and Legal & General lost 6%.

The Bank of England's surprise half-point rate cut earlier this week to 4.5% failed to shield housebuilders from the stock market chaos.

Barratt Developments dropped 10% in the FTSE 250 Index.

Global recession fears also impacted miners, with the prospect for a sharp fall in demand hitting major players such as Rio Tinto and BHP Billiton.

Oil prices also fell to a year low today on the recession worries, down to 82 US dollars a barrel at one stage.

US President George Bush is set to make a statement later today in Washington in an attempt to assure Americans that every action is being taken to stabilise the financial system.

It follows a day after the US stock market tumbled more than 600 points as a three-week ban on short-selling on almost 1,000 stocks was lifted.

Thursday's sell-off on Wall Street took place one year to the day after the Dow closed at its record high of 14,164.

Since then, frozen credit markets, record levels of mortgage defaults, job losses and outright fear have knocked 39% from the value of the US index.

America's treasury secretary Hank Paulson said yesterday he was "actively considering" injecting public money into financial institutions.

But the moves by central banks have so far failed to thaw frozen money markets, with the rate at which banks lend to each other for three months widening to 6.28% from 6.27%.