THE Dow Jones last night plunged by more than 1,000 points in the biggest one day fall since the global financial crisis - wiping stock market gains this year.

The devastating fall followed a traumatic day of financial trading that saw £27billion lost off the value of London’s blue-chip stocks as fears over interest rate hikes ripped through global markets.

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The FTSE 100 Index plunged 108.45 points to 7,334.98, as traders began pricing in the prospect of central banks enforcing tighter monetary policy in the United States, Europe and Asia.

European markets were enduring a rough ride on Monday, as the Cac 40 in France dropped 1.5% and Germany’s DAX lost 0.8%.

The Dow, which tracks 30 major US companies, has fallen more than 1,000 points over two days of trading.

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The market’s slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the market’s record-setting rally.

Mona Mahajan, investment strategist with Allianz Global Investors in New York, said: “When you have rates moving upwards, typically what happens is that financial conditions tighten, things like bank lending, mortgage lending start to slow and then the economy is at risk of a potential downturn.”