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London stockmarket plunges again on fears of deep worldwide recession


• FTSE 100 reaches lowest level of recent weeks
• US Federal Reserve expected to cut rates again
• Hong Kong share index closes down 12%

  • Monday October 27 2008 08.34 GMT

The London stockmarket plunged by more than 5% again this morning as the turmoil in the world’s financial markets continued.

The FTSE 100 index fell by 218 points in early trading to 3665, the lowest level it has reached in recent weeks, as the prospect of a deep worldwide recession continued to haunt investors, sending shares crashing in Asia.

The City took little comfort from speculation that the Bank of England may make another emergency cut in UK interest rates to try to stimulate the economy. Banking giant HSBC led the fallers in London, down over 10% on fears that emerging markets are the latest victims of the ongoing crisis. Not a single share rose on the index of Britain’s biggest companies.

The US Federal Reserve is also expected to cut the cost of borrowing later this week, but this did not prevent markets in France and Germany falling sharply this morning. The Dow Jones index is tipped to fall by another 400 points later today.

As the current crisis sparked by the failure of Lehman Brothers entered a seventh week, Asian stockmarkets suffered another day of panic selling. Japan’s Nikkei index fell 6.4% to its lowest level since 1982, extending its recent slump. It has now lost 20% of its value in the last week.

Hong Kong also saw shares routed, with the Hang Seng index plunging 12% – its biggest daily fall since 1997. And the Chinese stockmarket tumbled over 6%, bringing more pain to small investors who have watched the Shanghai Composite index fall 70% from last year’s peak. India’s stock market fell by 8%.

The latest sharp falls, following last week’s heavy losses, showed that investors have little confidence that the world’s leaders can stave off a painful economic contraction.

In Japan, Canon became the latest blue-chip company to slash its profit forecasts. It blamed the strength of the yen, which has pushed up the cost of its exports overseas.

The soaring yen is such a concern that the G7 group of industrialised nations expressed concern over its “volatility”, but this failed to stop the currency strengthening again.

The continuing turmoil in the financial markets has left many smaller countries facing a cash squeeze. The International Monetary Fund isdrawing up emergency plans for a new short-term loan facility to help these economies, and Ukraine and Hungary both accepted loans from the IMF yesterday.


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