US treasury secretary Steve Mnuchin moved to calm markets by taking the unusual steps of calling big banks directly to ensure they have enough cash. The measure may well have backfired, as European markets fell further on Monday.

The FTSE 100 dropped 0.5 per cent to 6,686, meaning £76bn has now been wiped off the index in December, its lowest level in two years. United Utilities, Imperial Brands and advertising giant WPP were among the biggest fallers. The Stoxx Europe 600 fell 0.5 per cent.

The sell-off came after Mr Mnuchin announced that he had spoken to the chief executives at Bank of America, Citi, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo in an apparent move to reassure investors as Donald Trump’s White House plunges to new depths of dysfunction.

“The [bank’s chief executives] confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations.” the US Treasury said.

“[Mr Mnuchin] also confirmed that they have not experienced any clearance or margin issues, and that the markets continue to function properly,”

Mr Mnuchin is to meet with the president’s working group on financial markets on Monday to discuss “coordination efforts to assure normal market operations”.

The group is more commonly known as the “plunge protection team” and includes Jerome Powell, the chair of the Federal Reserve, and Jay Clayton, head of the Securities and Exchange Commission. It met in 2009 in the midst of the tumult of the financial crisis, and after the 1987 stock market crash.

But the unusual announcement appeared to further rattle markets which have fallen in recent weeks but have not experienced anything like drastic shortfall in liquidity that caused lending to seize up during the credit crunch.

The US federal government shut down on Friday after an impasse over funding for the president’s proposed border wall while stocks had one of their worst weeks for a decade.

The S&P 500 is on course for its worst December since the Great Depression as a range of economic woes begin to crystallise.

Concern is growing that the US economy, for which the president has repeatedly taken credit, is running out of steam and that trade tensions with China could damage global growth.

Added to that, the Federal Reserve raised interest rates by 0.25 per cent on Thursday, increasing the costs of borrowing for households and businesses.

Mr Mnuchin also attempted to dampen rumours that Mr Trump had discussed the possibility of firing Mr Powell for raising rates.

The treasury secretary tweeted that Mr Trump had “never suggested firing” Mr Powell.