Global share prices sank today after US investment bank Lehman Brothers filed for bankruptcy protection, prompting a sharp exit from risk across world financial markets.
US stocks extended losses in early trade today, with the Dow industrials and S&P both down nearly 3 per cent as investors worried about the stability of the financial system after the Lehman bankruptcy.
The losses accelerated after shares of American International Group fell more than 50 per cent to $5.99 on fears over the major insurance company's ability to raise capital in the face of mortgage-related losses.
The Dow Jones industrial average was down 265.59 points, or 2.33 per cent, at 11,156.40.
The Standard & Poor's 500 Index was down 28.81 points, or 2.30 per cent, at 1,222.89. The Nasdaq Composite Index was down 38.30 points, or 1.69 per cent, at 2,222.97.
European stocks followed their Asian counterparts down after share prices in Australia, Singapore and Taiwan all dropped 3 to 4 per cent, while Indian stocks fell 5 per cent.
The FTSEurofirst 300 index of top European shares was down 4.5 per cent at 1,109.85 points.
Banking stocks led the fallers across Europe, with UBS, HSBC , Royal Bank of Scotland, Societe Generale, BNP Paribas and Credit Agricole trading 7-22 per cent lower.
Britain's leading share index tumbled 5 per cent by midday.
The FTSE 100 fell 277.4 points to 5,140.2, wiping out all of the gain made last week, and was on track for its worst day since January 21st. There was no gainer on the index.
HBOS topped the FTSE 100 losers' list, slumping 36 per cent to 181.7 pence, an all-time low. It was more than 730 pence at the start of the year.
HBOS is more reliant for its funding than any other major UK bank on borrowing in the wholesale market, and could face higher borrowing costs as a result of Lehman's collapse.
Lloyds TSB, HSBC, Royal Bank of Scotland, Standard Chartered and Barclays lost between 4 and 13.1 per cent.