The slump in world markets continued today despite efforts by world leaders to calm the crisis.
The FTSE 100 Index fell another 1.2% to 5185 following overnight declines in Asian markets amid the debt woes in the US and eurozone and fears that the global economy could be heading for recession.
The latest sell-off follows ratings agency Standard & Poor’s decision on Friday night to strip the US government of its prized AAA credit rating for the first time.
Meanwhile, the European Central Bank tried to pour oil on the troubled waters by announcing that it will “actively implement” a bond-purchase programme in a move designed to boost the financial stability of debt-ridden Spain and Italy.
And the finance ministers of the world’s seven biggest economies broke off from their summer holidays to agree to ensure liquidity to help markets operate smoothly.
But the moves did not allay the fears of investors as stocks were ditched in favour of less risky assets.
The London market lost 10% of its value last week as nearly £150bn was slashed from the value of the UK’s 100 biggest companies in its worst period of trading since October 2008.
Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said: “The market has not yet had the chance to react to the US downgrade – even though it was somewhat expected – or weak Asian trading overnight.
“Turbulence remains likely until such time as there are some concrete debt proposals from the US and the eurozone, where potential contagion remains an issue.”
The continued market turmoil is further bad news for millions of savers who will have seen their pension funds hit dramatically.
The CAC 40 in France and the DAX in Germany also opened down.
It follows a fall of 2% overnight for Japan’s Nikkei and more than 3% for Hong Kong’s Hang Seng.
But gold pushed to a new record high of over 1,700 US dollars per troy ounce today.