Fear factor drives markets down again in Asia
The crisis on the world's financial markets continued today as Asian stocks plunged after a bloodbath in London and New York.
Japan's benchmark Nikkei lost more than 4% in morning trading, Hong Kong's Hang Sang fell more than 7pc and indices in South Korea, Australia and New Zealand were also sharply lower.
Asia's woes came after New York's Dow Jones fell 5.5pc last night and a record slump on London's FTSE 100 Index.
London's index of leading shares yesterday slumped another 3.4pc, or 178 points, to close at a year-low of 5068.95 - the first time in its 27-year history that it has suffered falls of more than 100 points for four sessions in a row.
The footsie's losses were exacerbated by the sell-off on Wall Street as Wall Street traders got their first chance to react to Standard & Poor's (S&P's) historic decision to cut the country's AAA credit rating.
Investors fear that the move by S&P will batter already-weakening consumer confidence and hurt economic growth in the United States and beyond.
Wall Street's dive washed away hopes of a rally after the European Central Bank intervened in the markets for debt-laden Italian and Spanish bonds, helping to reduce borrowing costs in both countries.
Louise Cooper, an analyst at BGC Partners, said: "Equity markets are just dropping through the floor. Normally you would expect to see some kind of relief rally as bottom fishers come in looking for a bargain, but people are just terrified."
The London market lost 10pc of its value last week as nearly £150bn was slashed from the value of the UK's 100 biggest companies in its worst period of trading since the autumn of 2008.
The continued market turmoil has been bad news for millions of savers, who will have seen their pension funds hit dramatically.
Yesterday's fall wiped another £46 billion off the value of the FTSE 100 Index, taking the overall amount lost in the last seven sessions to £210bn.
The decline of more than 800 points represents a fall of 13.7pc.
Wall Street's slump has reflected growing fears that the US economy is heading for a double-dip recession, which have been building ever since the shock downward revision of growth in the first quarter of 2011 to just 0.4pc.
Michael McCarthy, chief strategist at Sydney-based stockbroker CMC Markets, told the Associated Press that the market turbulence was due to fears that the US economy was slowing down.
He said: "We're clearly in fear territory. The major driver here seems to be weakness in the US economy. There are fears that it's starting to stall and if that's the case, the whole global growth scenario could fall over."
The Federal Reserve meets today, but with interest rates already at nearly zero it faces calls to restart the quantitative easing programme that finished in June to help boost the US economy.