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World stockmarkets continued to fall today following yesterday's global rout after the OECD warned that the global recession will be even worse than expected.
After an early rally of around 30 points, the FTSE 100 dropped to a new six-year low of 3558.39, down 67.44 points or 1.8%. Yesterday the index plunged by 200 points to its lowest level since March 2003.
This followed further falls on Asia overnight, where the Hang Seng index in Hong Kong fell by 2.3% and Japan's Nikkei lost 0.7%.
The mood in the markets was not helped by the Organisation for Economic Cooperation and Development, which said today that the already pessimistic forecasts for the recession may need to be further downgraded.
"The recession will deepen, there's no doubt," said OECD chief economist Klaus Schmidt-Hebbel. "I think this quarter will be the worst quarter of all."
In January the International Monetary Fund cut its projection for global growth in 2009 from 2.2% to 0.5%. The OECD is now working on its own new projections for the downturn.
"The shape of it will be a significantly deeper recession than what was forecast by the IMF in January, at all levels," said Schmidt-Hebbel.
With little to cheer the markets, CMC Markets dealer Matt Buckland warned that they are likely to remain volatile.
"Sentiment looks set to be the dominating factor in the hours ahead and, put simply, if there's a genuine belief that further value needs to be taken out of the market then we'll be in for another ugly session," he said.
The Dow Jones in New York was expected to open just 50 points higher later today, Wall Street futures indicated. The index slumped to 6763 yesterday, its lowest point in 12 years, when insurance giant AIG made the biggest losses ever seen in US history.
Richard Turner, a trader at IG Index, said there was little to stop the Dow from falling further in coming days. "6,500 is the next big level," he said. "You'd be very brave or very stupid to call the bottom of the market."
In London, HSBC spooked markets yesterday when it announced a record-breaking £12.5bn cash call. It also cut its dividend and admitted its investment in the US sub-prime mortgage market had been "catastrophic" - it lost the entire $15bn (£10.7bn).
Emerging markets bank Standard Chartered brought some relief to the beleaguered banking sector when it reported better-than-expected annual profits this morning. The shares jumped by more than 11% to as high as 661p and later traded up 2% at 600p.
"Sentiment towards the banking sector is still very negative," said David Jones, chief market strategist at IG Index.
In London, shares in Barclays lost 7.5% and Lloyds Banking Group were 7.12% lower. Mining giant Xstrata led the fallers, with a 9% decline.
Sterling was also under pressure, threatening to fall below $1.4 against the dollar. The Bank of England will start its two-day meeting on interest rates tomorrow, and is expected to cut again. Howard Archer of Global Insight believes the cost of borrowing will call by another half-point to 1%.
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