European markets tumble on open

Stock markets across Europe have fallen steeply on opening after earlier dramatic share price falls in Asia.

In London, the FTSE 100 share index plunged 9.8% or 426 points on the open to 3,887.23 points.

There were similar falls across Europe - Paris was down 9% while Switzerland was down 8%.

Earlier Tokyo's Nikkei index dropped 9.6% in its biggest one-day fall since 1987, while shares in Australia, Hong Kong and Singapore all plummeted.

Despite concerted government action, investors are increasingly fearful the financial crisis will prompt a global recession.

Finance ministers from the G7 leading industrial countries are set to meet in Washington to discuss the crisis.

US President George W Bush is due to make an address to the American people later in the day.

'Deeper panic'

Heavy falls were seen across Asia's markets as a climate of fear took hold on Friday.

As the Nikkei-225 index slumped in its biggest fall in a single session since the 1987 stock market crash, the global crisis claimed its first Japanese financial institution, with the insurance company Yamato Life going bankrupt.

"Selling is unstoppable in New York and Tokyo," said Yutaka Miura, senior strategist at Shinko Securities in Tokyo.

"Investors were gripped by fear."

At the end of trading on Friday, Tokyo shares had plunged 24% during the week - double their weekly fall during the 1987 market crash.

Elsewhere in Asia was a similar story.

Australian shares closed down 8.3%, Hong Kong's benchmark Hang Seng index slumped to a three-year low, in the Philippines, share prices closed down more 8.3% while Shanghai's index was down 3.8%.

In Indonesia, plans to re-open the stock market were suspended in order to prevent what the president of the exchange called "deeper panic". Trading was halted for two days earlier this week.

'Beyond fundamentals'

As well as the G7 meeting, talks will be held at the International Monetary Fund (IMF) in Washington.

The IMF has said it is ready to lend to countries hit by the global credit crunch, using an emergency lending procedure first used in the 1990s Asian crisis.

The organisation's chief, Dominique Strauss-Khan, said on Thursday this would allow the IMF to react quickly to support countries facing funding problems.

Mr Strauss-Kahn said the world was "on the cusp of recession", but could still recover.

The IMF has about $200bn immediately available to lend to countries in need but can tap other sources.

The Dow Jones - the US benchmark index - ended down 7.3% on Thursday - tumbling below 9,000 points for the first time since August 2003.

"We're way beyond fundamentals," said Chris Orndorff, head of equity strategy at Payden & Rygel, in Los Angeles.

"This is just pure panic, that's all it is."

Stocks falter as fears persist

Stock markets have lost ground, erasing earlier gains as nervous investors remained concerned that the financial crisis would lead to a world recession.

On Wall Street, the Dow Jones was down 1.63% despite opening higher.

European shares followed their US counterparts lower, with the FTSE 100 down 2.34%, France's Cac 40 down 2.1% and Germany's Dax down 1.6%.

Investors had earlier taken some comfort from Wednesday's co-ordinated rate cuts and a UK bank rescue plan.

More guarantees

As the turbulent week continued, in other developments:

The IMF head said the world economy was on the "cusp of a recession". Dominique Strauss-Kahn called on countries to work in joint action and forecast that a slow recovery would begin in the second half of 2009.
The British Bankers' Association said the interbank cost of borrowing overnight had fallen - a day after interest rate cuts and governments provided additional liquidity. However, longer-term lending rates rose to their highest this year.
Iceland suspended trading on its OMX Nordic Exchange until Monday, citing "unusual market conditions". Earlier, its largest bank, Kaupthing, became the third financial institution to be taken over by the country's government in the past week.
Ireland extended its guarantee of bank deposits to cover savings in Irish branches of five foreign-owned institutions Northern Ireland's Ulster Bank, British-owned First Active and HBOS, Belgium's IIB Bank and German-owned Postbank.
Gordon Brown wrote to G7 and EU leaders suggesting that the UK government's bank rescue plan could be a template for other nations to help unfreeze credit markets.
US Treasury Secretary Henry Paulson warned that some banks will still fail despite the $700bn (£406bn) rescue package to shore up the financial system.
Dexia shares jumped 25% after France, Belgium and Luxembourg announced they would provide state guarantees for its borrowings.
UK Chancellor Alistair Darling flew to the US to discuss the co-ordinated cutting of interest rates by six central banks.
In Asia, Japan's Nikkei index ended lower after Prime Minister Taro Aso urged more action to boost the country's economy - on top of a 2 trillion yen ($19.5bn; £11.5bn) stimulus plan already put forward.
After trading on Russian stock markets had been suspended following sharp share falls earlier this week, they were again halted - this time after stocks climbed too high after trade resumed.
'False dawns'

Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.

It came after the UK government's announcement of a package of measures aimed at rescuing the banking system.

This package makes available £400bn ($692bn) of fresh money.

There was "an air of cautious optimism" that such measures would have some impact on the financial crisis, said Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers.

"Banking shares have been the main beneficiaries of the UK's rescue plan, and the interest rate cuts," he added.

"We've had a few false dawns over the past couple of months and it's too early to call a complete recovery, but there's hope that these measures will get some traction at some point."

More rate cuts

Japan's benchmark Nikkei lost 0.5% or 45.83 points to close at 9,157.5.

Shares had been ahead for most of trading after the Bank of Japan injected two trillion yen into the money markets in an effort to calm fears.

But Mr Aso's call for further action prompted a sell-off.

The Nikkei had suffered its biggest one-day drop in 21 years on Wednesday, with the index shedding nearly 10% of its value.

In Sydney, Australia's main share index fell 1.8%, but Hong Kong's Hang Seng index added 3.3% after its central bank announced a half a percentage point cut to its interest rate, taking it to 2%.

South Korea's stock market climbed after the central bank announced an interest rate cut of a quarter of a percentage point.