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Shares on Wall Street and London plunged today as world stockmarkets suffered another rout amid growing fears of a deep and protracted global recession.
The Dow Jones fell by nearly 300 points this afternoon, with banks, energy companies, tech firms and airlines all seeing double digit percentage falls in a chaotic opening few minutes of trading.
"We are getting used to wild swings in the markets, but today's moves verge on the bizarre," said Julian Jessop, the chief international economist at Capital Economics, referring to steep falls across European stock markets.
In the City, almost £50bn was wiped off the value of Britain's biggest companies as the FTSE suffered another steep drop after the UK economy suffered a shock decline.
The FTSE 100 closed down 5%, losing 204 points to finish at 3883.
There were also heavy losses in Europe as Germany's Dax index fell by 5.4% Germany and France's CAC40 closed down 3.9%.
Stockmarket jitters in Europe spread to trading in Dow Jones futures, which had to be suspended several times because of the weight of heavy selling before Wall Street opened.
By 2.45pm, the Dow had dropped to 8288, a 400-point fall that one market commentator described as "beyond volatile", although the index clawed back some of its losses by 5pm and was down by 282 points.
In London, traders dumped shares when the market opened and continued selling as the bad news kept coming. At one stage, the FTSE 100 had tumbled by more than 9%, or 372 points, to 3715 - its lowest point in the current crisis, before it staged a late recovery.
"I sense we've moved beyond the credit crisis. There's a recognition of the damage inflicted on the global economy, that is the recession, by the credit crisis," said Mike Lenhoff, at stockbroker Brewin Dolphin. "It's not just limited to the developed world. You can run but you can't hide anywhere."
The mood was not helped by further weakening of the pound, which slumped to a five and a half-year low against the dollar after the Office for National Statistics reported that UK GDP shrank by 0.5% in the third quarter.
Rumours swept the City that General Motors might go bust, or that America might suspend trading on Wall Street for a week, although it was not clear how seriously these were being treated.
As with Wall Street, banks led the FTSE 100 fallers, with HBOS plunging 17%, and Standard Chartered, HSBC and Barclays all down 10%. The London Stock Exchange, Prudential and Aviva also suffered double-digit declines and not a single share was in positive territory.
Oil cartel Opec added to the gloom by cutting oil production by less than some analysts had hoped.
David Jones, chief market strategist at IG Index, said that traders were alarmed by the 0.5% drop in UK GDP which has crushed any hopes that the worst of the crisis might be over.
"It's as if the banking crisis took everyone's eyes off the real economy, and now the markets have looked back and they don't like what they see," said Jones. "The recession is going to be much worse than expected."
Manus Cranny, spokesman for MF Global Spreads, said that the City was dealing with "a heady cocktail" of speculation, but that the underlying factor is the weakness of the UK economy.
"Today, the Footsie is saying that 'yes, we truly believe that a recession is definitely happening'. Anyone who thinks that this could be a short, shallow recession, because of the use of instruments like interest rates, is seriously deluded," Cranny said.
Panic selling in Asia
The latest global selloff began in Asia overnight, where Japan's Nikkei index fell by almost 10% on the back of a shock profits warning from Sony.
The Chinese premier, Wen Jiabao, issued a grim warning at a meeting of 27 EU member states and 16 Asian nations.
"The global financial crisis has been constantly spreading and worsening, creating a severe shock to global economic growth," he said.
And underlining the scale of the problems facing the UK, Bank of England deputy governor Charlie Bean said it could be the worst financial crisis ever.
"This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history," he said.
The UK economy was widely expected to have shrunk in the third quarter of 2008, but few analysts had predicted such a steep drop. Christian Gattiker, head of research and equity strategy at Julius Baer, who had predicted a 0.5% decline, warned this morning that the financial crisis means the UK faces "quite a bleak outlook".
In Japan the Nikkei plunged by 9.6%, or 811.9 points, to 7649.08. It has now lost half its value in the last 12 months. Tech stocks led the fallers on the back of Sony's admission that the strong yen is damaging its exports and that it is seeing less demand for electronics products. Its shares fell by 14% today.
The yen has risen sharply against other currencies, hitting a 13-year high against the US dollar today.
South Korea saw even greater falls, with the Korean Composite Index down by 10.5%. The sell-off was fuelled by a grim trading statement from Samsung. The electronics giant posting a 44% drop in earnings after prices of its flat-screen displays and memory chips fell.
"We foresee the coming months to be an even more challenging period," warned Chu Woo-sik, a Samsung spokesman.
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