It's Freefall Friday: Dow Jones plunges as FTSE suffers worst week since 1987 Crash



FTSE suffers worst week since 1987 crash



Dow plunges 700pts at opening before climbing back



Short and long-term inter-bank lending rates rise

Pound slumps to five-year low against dollar

Bush says 'we will come through this together'

Berlusconi suggests world markets could be shut



Blind panic swept through the City and Wall Street today as shares collapsed following huge losses all around the globe.

Traders were in a state of 'paralytic fear' in London when the Stock Market fell through the floor on opening, losing £250million each second for the first seven minutes.

During the day, it climbed back to close down 8.9 per cent but even this surpassed Monday's record sell-off.

In one week, the FTSE has dived a massive 21 per cent. It is its worst seven days since the Black Monday Crash of 1987.



The extraordinary scenes were echoed across the Atlantic when the Dow Jones opened in New York this afternoon and immediately plunged almost 700 points.

Free-fall: Traders around the world could only look on aghast as shares plunged. In London, they fell 440 points within seven minutes of trading

President Bush, in an emergency statement after Wall Street opened, tried to calm the growing panic and insisted the world would pull through the financial crisis together.



He said the US was working ‘closely with our partners from around the world’ to steady the markets.



‘We’re in this together and we’ll come through this together,’ said the grim-faced president.



He added that the U.S. government's financial rescue plan was aggressive enough and big enough to work although it would take time to fully kick in, but investors remained panicked.

Italian Prime Minister Silvio Berlusconi revealed political leaders believed they might have to close the world's financial markets while they work out a solution.



Speaking in Naples today, he said: 'The idea of suspending the markets for the time it takes to rewrite the rules is being discussed.'

Shares across the board fell today, proving fears of a global recession as well as concerns about the stability of the financial sector are now coming home to roost.

There is growing panic that, despite drastic action in the U.S. and Britain and an emergency rates cut, nothing so far has managed to stop the crisis in its tracks.

In the red: From London to Sydney, stocks tumbled

Any hopes Gordon Brown's £500billion package might steady the ship were dashed when inter-bank lending rates rose today, proving the credit markets are still frozen.

The overnight rate for sterling rose 0.4 per cent to 5.81 and the three-month lending rate - a key measure in pricing mortgages - was up 6.281 to 6.285.

Everywhere from Japan to Australia, stocks fell by huge margins leaving desolate traders with nothing to do but pray their fortunes might improve.

Russia, Iceland, Austria, Romania and Ukraine all suspended their markets to prevent further losses.

Henk Potts, director of investment strategy at Barclays Stockbrokers, said: 'I think it's very close to panic. We are drowning in a sea of red numbers.'

In the UK, Gordon Brown urged world leaders to find a 'global solution' to the crisis as Chancellor Alistair Darling discussed rescue measures with finance chiefs in Washington.

From the White House, the U.S. President tried to reassure his people after last night's collapse on Wall Street saw stocks fall 7.3 per cent and drop below 9,000 for the first time since 2003.



He promised the Government was doing absolutely everything to save its crippled economy and people's livelihoods, detailing each rescue measure in turn.



'This is an anxious time but the American people can be confident in our economic future,' he declared. 'We know what the problems are and we have the tools to fix them and we are working quickly to do so... We all share the determination to solve this problem and that is exactly what we are going to do.'

The U.S. was working closely with 'partners around the world' to make sure any bail-out was co-ordinated and effective, he added.

'With these efforts the world is sending an unmistakable signal: we are in this together and we will come through this together.'

Defending his $700billion banking bail-out, he insisted it was 'aggressive' and the 'right plan' but admitted it would take time to have an effect.

On the FTSE, bank shares were among the biggest losers and in early trading just one company managed to stay in the red.

By lunchtime, HBOS was down down 17 per cent, RBS 16 per cent, HSBC 13 per cent and Barclays 15 per cent.

David Buik, of brokers BGC Partners said: 'It’s official. It’s a bloodbath. Just pure blind panic.'

Analsyt Justin Urquhart Steward added: 'There's a whiff of cordite in the City that I haven't noticed since 1987.'

Glum: A Wall Street trader looks on as it plunges 7.3 per cent to below 9,000 for the first time since 2003. The drop unleashed fresh panic around the globe

Meanwhile, Wall Street giant Morgan Stanley suffered another alarming plunge in its share price today.

The embattled investment bank lost as much as 30pc of its value after ratings agency Moody's threatened to downgrade the firm's credit rating.



The move intensified fears that Morgan Stanley, which employs around 5,000 staff in the UK, could get frozen out of the wholesale lending markets, putting it in danger of going bust.



As fears of a lengthy recession deepened, the price of oil also dropped to below $80 for the first time in a year.

Adding to the general panic was the fact that today is when credit default swaps related to the debts of collapsed investment bank Lehman Brothers are to be decided.

Experts have estimated claims by creditors of the firm could run to $400billion which will hit banks, hedge funds, insurers and other financial institutions with fresh woes.

And in Britain, there was further gloom because the pound has now slumped to a five-year low against the dollar.

Across the world, shares were in the red. In Europe, benchmark indexes in France and Germany also plunged almost 10 per cent in early trading.

Both were still down around six per cent towards the close. Spain's Ibex stock index also fell more than six per cent.

Helpless: Australian shares suffered their biggest ever one-day loss to drop to a three-year low as panic raced around the world

Desolate: A trader at the Indonesia Stock Exchange in Jakarta. Markets were eventually suspended across the region because of the turmoil

In Asia, Japan's Nikkei closed down 9.62 per cent in its worst session since Black Monday in 1987. The Hang Seng in Hong Kong closed down more than seven per cent and China's benchmark index was down 3.57 per cent.

'Selling is unstoppable in New York and Tokyo,' said Yutaka Miura, senior strategist at Shinko Securities Co. Ltd. 'Investors were gripped by fear.'

Yamato Life Insurance Co in Japan became the country's first financial collapse of the crisis, folding with £1.8trillion in debts.

In the Philippines, shares closed down 8.3 per cent. Trading was suspended 'indefinitely' in Indonesia to prevent any more losses.

Meanwhile, in Australia, experts dubbed it 'Black Friday' after its stocks tumbled 8.34 per cent in its biggest ever one-day loss. In New Zealand, shares fell 4.72 per cent.

'There's no bottom to the stock markets now,' added Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. 'There's no clue when it will stop.'

Traders were reduced to praying for calm. In Singapore, where shares plunged seven per cent, they flocked to stroke the belly of a 7ft Buddha statue in the hope some good fortune would rub off.

'I came down here on my lunch break to get some luck for me and for the whole world, the economy, everything, but there are some things even Buddha can't help,' said Albert Goh, a 60-year-old accountant.

He can't look: The Hang Seng in Hong Kong plunged more than 1,200 points

The sell-off on Wall Street last night took place exactly one year to the day after the Dow enjoyed a record high of 14,164.

Since then, frozen credit markets, rocketing levels of mortgage defaults, job losses and outright fear have knocked 39 per cent from its value. On paper, the losses are worth $8.3trillion.

A temporary ban on short-selling in the U.S. - the practice of making money from falling share prices - has also now expired, adding to the turmoil.

David Wyss, chief economist at Standard & Poor's in New York said: 'Right now the market is just panicked. Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress.'

The world's economic powers are under huge pressure to act boldly together in a bid to try and stop the crisis from escalating further.

Mr Darling was discussing a way forward with other financial leaders from the G7 group of the world's richest countries this afternoon.



'Politicians must be scared by now, looking at stock markets and the problems in the credit markets,' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd in Hong Kong.

'Much more needs to be done,' he said. 'The G7 has to announce that they will provide massive capital injections and guarantees for the inter-bank market.'

Singapore: Buddhists rub the face and belly of the 'Laughing Buddha' statue in the hope it might bring them some good fortune

At the centre of a financial crisis, now almost a month old, credit markets remain in deep distress because banks are so desperate to hang onto the money they have.

Until they start to lend to each other, there is little hope of relief for people in need of money for mortgages or to keep their businesses going during the slowdown.

In the latest attempt to ease the panic, the U.S. and Dutch governments are preparing to follow Britain's lead and shore up the capital of banks.

The U.S. Treasury plans to start injecting capital in banks as early as this month, according to a source close to Treasury Secretary Henry Paulson.

This would mean an even larger role for the U.S. government, making it the lender and investor of last resort.

Until this week, American policy had been to focus on buying up banks' 'toxic' mortgage debts but experts hope recapitalisation might be a more direct strategy.





