Stock market crash in action

London share prices continue in freefall this morning, continuing the losses already seen during last week.

Already over 200 points have been wiped out, sending the FTSE 100 into 5600 figures, and momentum continues, threatening a crash in share prices across the board.

While predictions of an investor bubble has long plagued equities, news that the US is in recession seems to have finally pricked prices in a way even the first salvoes of the Credit Crunch could not hammer down.

While there is expectation of a rally this morning, the trend suggests that the rally will weaken, and shares will close sharply down on the morning opening.

It even remains possible that prices will collapse significantly further, resulting in a some commentators will declare a stock market crash of some degree.

In the meantime, while composing this piece the FTSE seems to have stabilised around 5685 between 11:15-11:30, but it remains to be seen whether this will be a brake or a mere breather on the falls.

14:00 UPDATE 1: The first rally happened over lunchtime, bringing losses on the FTSE to around 200 points, but the rally is currently fading and points are down over 250 again.

Ironically, Northern Rock shares are up over 40% so far.

16:00 UPDATE 2: The FTSE has seen a few minor rallies, with the fall moving between 200-250 points, but now falling to nearer a 300-point loss.

The perception is trusts grabbing shares while hunting for bargains and profit taking during volatility.

However, with Morgan Stanley predicting the FTSE 100 could drop to 5350 over the next 12-18 months, shares purchased now may not be the bargains they appear to be, at least in the short-term.

16:15 UPDATE 3: The FTSE 100 is now 285 points down. 16 more and it will go below 5600. If it does, it will mean an overall fall of 5% today.

17:15 UPDATE 4: The FTSE 100 closed down 323 points: now 5578.2 points.