The slow recovery in world stock markets has been eroded amid warnings of double-dip recession - with the FTSE having £62.3bn wiped off its value.

A downgrade for world economic growth by the American bank Morgan Stanley added to sell-offs, initially driven by weak economic data from the UK, Japan and China.

In its latest forecast, Morgan Stanley made stinging criticism of Washington and eurozone Governments for failing to act more decisively to contain their separate sovereign debt issues.

It cut its expectations for global GDP growth in 2011 to 3.9% from 4.2% and from 4.5% the next year to 3.8%.

The FTSE 100 opened 1.2% lower and the losses extended through the day - closing down by 4.49%, the 12th biggest points fall in its history.

In New York, the Dow Jones later closed 3.7% down.

Weaker than expected UK retail sales data fed into the general feeling of gloom while fears that China would act again to cool its economy hit mining stocks.

Banks lost value over continuing concerns about exposure to eurozone debt.





The sell-off was felt more keenly on the main European markets - the DAX in Germany falling to close down 5.82%.

France's CAC was also hit, ending the day down by 5.48%.

The price of gold hit another new record high of $1,825 per ounce as investors left risk behind and made a dash for safe havens.

In the US, the Dow Jones Industrial Average opened 2.2% lower with the latest data on the country's jobs market also disappointing.

In its forecast, the co-head of Morgan Stanley's economic team warned that "soggy" asset markets were a factor behind the lower growth expectations.

Joachim Fels said on the prospect of recession: "It won't take much in the form of additional shocks to tip the balance."

Germany shocked the markets on Tuesday when it reported growth of just 0.1% in its second quarter - lower than that of the UK.

Analysts believe the knock-on effects of the Japanese tsunami in March hit the global supply chain harder than had been expected.