The FTSE 100 fell 4.1% on Thursday as ongoing credit concerns hammered markets around the world.
London's blue-chip index closed down 250 points at 5,859 - it is the first time the index has closed below 6,000 since October 2006.
Financial stocks including Man Group, Northern Rock and Invesco took a battering, whist the mining sector also suffered heavy losses on falling commodities prices (see below).
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It was a similar story across Europe as stocks notched up their biggest one-day fall in four and a half years. In Paris, the CAC-40 was down 3.3% to 5,265 and the Frankfurt DAX-30 was down 2.4% to 7,294.
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Having begun Friday strongly, the major European indices had begun to slide again this morning.
Financials lead late rally on Wall Street
On Wall Street, the Dow Jones fell over 100 points in the first four minutes of trading as fresh economic data plus news from Countrywide Financial Corps stoked credit concerns.
On Wall Street, the Dow Jones fell by as much as 340 points earlier in the session as fresh economic data plus news from Countrywide Financial Corps stoked credit concerns. However, the index went on to end the day just 15 points lower - at 12,845 - thanks to a late bounce led by the financial sector. Bear Stearns jumped nearly 13% on news that it was in talks with potential investors, and peers including JP Morgan and Citigroup were also sharply higher. The S&P 500 reversed earlier losses and ended the day 4 points higher, at 1,411. However, the tech-heavy Nasdaq was down 7 points, at 2,451.
Commodities rout
In the commodities markets, crude oil fell 3.5 % yesterday as investors closed out their positions in order to cover losses in the equity markets, but had risen to $71.44 this morning as Hurricane Dean gathered strength.
Concerns over slowing economic growth saw copper for delivery in three months slump nearly 8% to close at $6,880 a tonne yesterday. However, the metal was rising again this morning, as were zinc and aluminium.
Spot gold had fallen to $646.75 this morning, down from $650.50 in New York late last night. And silver was down to $11.51.
Carry trades unwind
In the currency markets, the pound fell to its lowest level against the yen in almost a year this morning - 219.13 as carry trades continued to unwind.
Last updated: 11am, 17/8/07
