Havoc on markets as crisis intensifies

Financial crisis deepens as panic returns to world markets despite coordinated action to restore confidence

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Friday, 10, Oct 2008 05:32

The financial crisis deepened on Friday as panic returned to world markets despite coordinated action to restore confidence.

Moments after opening the Dow Jones slumped by eight per cent, mirroring early falls of up to ten per cen ton the FTSE 100 and Asian markets overnight.

Panic selling in early trading saw the FTSE 100 dip below 4,000 points for the time in five years, with the market continuing to fluctuate.

By lunchtime it was down about seven per cent, falling further to close at 8.85 per cent down.

G7 finance ministers are due to meet later in Washington to discuss the crisis, which has affected stock markets across the world.

In an address from the White House, George Bush tried to comfort the world's markets, saying he will act aggressively to solve the financial crisis.

Failing to announce any new measures the president said: "The US government is acting and will continue to act to add stability to markets.

"Banks have suffered losses," he said, "creating uncertainty and anxiety among our people. Anxiety can feed anxiety… making it hard to see the problem."

In Paris and Germany falls of nine per cent were felt when trading began, with similar slumps witnessed in Tokyo, Australia, Hong Kong, Singapore and India.

Earlier this week world central banks announced a 0.5 percentage point cut in interest rates, while the UK government confirmed a £500 billion bailout of domestic banks.

But the rescue package has done little to reassure traders in the short-term, with UK banking stocks suffering in early trading this morning.

The market falls come as a delegation of Treasury officials journeys to Reykjavik to hold talks over the collapse of the country's banking system – where millions of pounds of British savings – by both individuals and local authorities – is held.