Economics / Markets

In London, shares have plummeted in early trading amid fears a US bail-out plan might take some time to materialise, and by mid-morning the FTSE 100 was down 80/29 points (1.53%) to 5,155.97.

After remaining broadly stable in early trade, London shares began to fall after US markets opened with negative sentiment, and the FTSE 100 closed down 75.04 points (1.41%) at 5,236.26.

Global markets have likely seen a "capitulation" stage, though recent gains will need be consolidated before further recovery, according to Peter Lucas, global investment strategist at Ashburton.

Alistair Darling's promise to avoid ‘knee jerk' reactions to combat weaknesses in the financial system, has done little to bolster investor confidence, as the FTSE plunges 40.06 points (0.75%) to 5271.21.

Relentless trading on the FTSE helped it to a near 9% gain on Friday and a record one-day rise.

The swift advance of banks on the FTSE this morning may represent the clearest sign yet the UK markets view yesterday's events as the beginning of the end of a financial crisis described as the worst since the Great Depression.

Shares in HBOS are soaring in early trading on Thursday on the back of its confirmed £12.2bn takeover by Lloyds TSB.

The MPC could be set to slash interest rates in October, according to New Star's chief economist, Simon Ward.

The FTSE100 plunged under the 5,000 barrier for the first time since June 2005 this afternoon while the US market fell on more bad news from AIG.

CPI inflation rose to 4.7pc in August, the highest level recorded since CPI records began in 1997, with the upturn attributed to higher energy and food prices, compared to a year ago.