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Global shares carry on tumbling Global shares carry on tumbling
(40 minutes later)
European shares have been trading lower following dramatic falls in Asia that saw Tokyo's Nikkei index fall 11%.European shares have been trading lower following dramatic falls in Asia that saw Tokyo's Nikkei index fall 11%.
Global falls have largely wiped out the gains earlier in the week, as fears of recession cancelled out any optimism from government bank rescue packages.Global falls have largely wiped out the gains earlier in the week, as fears of recession cancelled out any optimism from government bank rescue packages.
In early trading, London's FTSE 100 fell 2.3% while the Cac 40 in Paris and the Dax in Frankfurt both fell 3.1%. London's FTSE 100 fell 3.2%, the Cac 40 index in Paris fell 4% and the Dax in Frankfurt dropped 2.3%.
On Wednesday, New York's Dow Jones saw its worst one-day percentage fall since October 1987, closing almost 8% down.On Wednesday, New York's Dow Jones saw its worst one-day percentage fall since October 1987, closing almost 8% down.
FTSE 100 INDEX: 16 October 2008*All Times GMT
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  • In Tokyo, the Nikkei 225 index fell more than 1,000 points, closing down 11.4% at 8,458.45
  • Hong Kong's Hang Seng fell 7.6% to 14,785.60 points
  • Australia's main share index fell 6.7% while India's was down 4%
  • Fears of a protracted downturn also hit oil prices with benchmark US light, sweet crude for November delivery at a 14-month low of $71.64 a barrel
FTSE 100 INDEX: 16 October 2008*All Times GMT
Elsewhere on the markets:
  • In Tokyo, the Nikkei 225 index fell more than 1,000 points, closing down 11.4% at 8,458.45
  • Hong Kong's Hang Seng fell 7.6% to 14,785.60 points
  • Australia's main share index fell 6.7% while India's was down 4%
  • Fears of a protracted downturn also hit oil prices, with benchmark US light, sweet crude for November delivery at a 14-month low of $71.64 a barrel
Protracted slowdown
Shares rose earlier in the week on optimism after more details emerged about the bank rescue packages being proposed by the UK and the European Union.
What we're witnessing is the limits of what these banking bail-outs can achieve in the face of what increasingly looks like the onset of a global economic recession Robert Peston, BBC business editor Read Peston's PicksWhat we're witnessing is the limits of what these banking bail-outs can achieve in the face of what increasingly looks like the onset of a global economic recession Robert Peston, BBC business editor Read Peston's Picks
Stocks had risen earlier in the week after governments acted to aid banks, but these gains have mostly been lost. But worries about how a protracted economic slowdown would affect the rest of the economy are now coming to the fore.
Investors fear that efforts to stem the banking crisis will not be enough to prevent a recession. "Sentiment is deteriorating very fast," said Jacky Choi, a fund manager at Value Partners.
BBC business editor Robert Peston said that despite recent actions by central banks to help the banking sector, banks were still not lending to each other at anything like a normal rate of interest relative to official rates. "People are losing what little confidence they have on a day-by-day basis."
This was worrying as it meant banks were unlikely to lend money at better rates to consumers and businesses. Insufficient
'Real economy' impact Sentiment was not helped by suggestions from the Japanese Prime Minister that the $700bn (£406bn) US bank bail-out package was not enough.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
"There's a certain degree of panic selling in Tokyo but the sentiment is different from last week," Takashi Ushio, head of the investment strategy division at Marusan Securities, was quoted as saying by Reuters news agency. "Since it was insufficient, the market is again falling sharply," Taro Aso said.
"Last week people were panicking over the financial system, nobody really knew what would happen. But now it's the real economy." There were also signs that the cash injections from central banks had not yet restored confidence in the banking sector.
Yutaka Miura, senior strategist at Shinko Securities, said investors were particularly unnerved by a 1.2% fall in the value of US retail sales between August and September. BBC business editor Robert Peston said that banks were still not lending to each other at anything like a normal rate of interest relative to official rates.
"It really confirmed a severe slowdown in the US economy," he told the Associated Press news agency. This was worrying as it meant banks were unlikely to lend money at better rates to consumers and businesses.
No quick turnaroundNo quick turnaround
Yutaka Miura, senior strategist at Shinko Securities, said investors had been particularly unnerved by Wednesday's news of a 1.2% fall in the value of US retail sales between August and September.
"It really confirmed a severe slowdown in the US economy," he told the Associated Press news agency.
Many investors are now convinced that the US economy, if not already in a recession, is moving towards one.Many investors are now convinced that the US economy, if not already in a recession, is moving towards one.
Ben Bernanke, the chairman of the Federal Reserve, warned that the US economy now faced a "significant threat" from the credit crisis.Ben Bernanke, the chairman of the Federal Reserve, warned that the US economy now faced a "significant threat" from the credit crisis.
In a speech in New York, Mr Bernanke said the US had avoided making the mistakes that helped plunge the country into the 1930s Great Depression.In a speech in New York, Mr Bernanke said the US had avoided making the mistakes that helped plunge the country into the 1930s Great Depression.
He pledged that the Fed would continue to fight the credit crisis. But he warned it would take time for the country's economic health to mend.He pledged that the Fed would continue to fight the credit crisis. But he warned it would take time for the country's economic health to mend.
"The turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," he said."The turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," he said.
"The last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the US economy.""The last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the US economy."
The leaders of the G8 major industrialised nations agreed on Wednesday to hold a summit with other states to discuss global financial reform.
In Brussels, EU leaders rallied behind a plan to aid the bloc's banking sector.
How worried are you about a recession? What financial questions would you like to put to the experts? Send us your queries using the form below.How worried are you about a recession? What financial questions would you like to put to the experts? Send us your queries using the form below.
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