World markets including the FTSE fell in early trading as weak economic data and Moody's downgrade of 15 banks unnerved investors.
Meanwhile, concerns about slowing global demand also hit oil prices with brent crude dropping to an 18-month low of $88.90 a barrel, matching December 2010 lows set in the previous trading session.
In London, the FTSE 100 fell nearly 1% on opening this morning after Moody's downgrade of 15 major financial institutions weakened banking shares.
Credit Suisse received the most severe downgrade at three notches, the maximum allowed in the review. Ten other banks were downgraded by two notches and the remaining four, including RBS and HSBC suffered a one notch downgrade.
Just before 9am, the FTSE 100 had fallen 0.8% to 5,521. Royal Bank of Scotland shares had fallen just over 1% to 240p per share, while Barclays had fallen 0.62% to 201p. Shares in Lloyds were relatively flat, at 0.6% lower at 31.25p.
European stock markets also weakened on the news. The Cac 40 had fallen 0.95% to 3,084 and the Dax dropped 1% to 6,279.
The slump echoed falls on the US and Asian stock markets last night. The Dow Jones fell 1.96% to 12,573, the Nasdaq shed 2.44% to trade at 2,859, while the S&P 500 dropped 2.23% to 1,325, following the Federal Reserve's decision to revise down US GDP yesterday from 1.9% to 2.4%.
Asian markets were also weaker, with the Hang Seng falling 1.42% and the Shanghai index down 1.35%.
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