Shares are savaged by new bout of the shakes

The FTSE 100 index fell 94.8 points to 6290.3 after heavy losses in New York last night and Asia this morning. The nervous start followed a technical glitch which forced the London Stock Exchange to extend its closing auction by more than an hour yesterday.

It came as the crisis in credit markets sparked by the collapse of subprime mortgages in the US deepened, raising fresh fears about the US economy.

The dollar's fall to record lows and oil's continued march towards $100 a barrel added to the woes. The pound was down 0.12 of a cent at $2.1008 today.

It provided a difficult backdrop to the latest Bank of England meeting to set interest rates for the month.

The two-day meeting has been overshadowed by a public spat between Governor Mervyn King and Chancellor Alistair Darling over the handling of the Northern Rock crisis, the first run on a British bank since Victorian times.

Gordon Brown and Darling have now delayed their decision on whether to reappoint King until next year - casting serious doubts over his future.

The Bank's monetary policy committee was today expected to leave rates on hold at 5.75% despite signs of a slowdown in the housing market and consumer spending. Mortgage lender Halifax today said house prices fell

0.5% between September and October. The annual rate of growth fell to 8.9% from 10.7% in September.

"The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand," said Halifax chief economist Martin Ellis.

Manufacturers are also struggling to deal with high interest rates and the strength of the pound against the dollar, which has hit exports across the Atlantic. However, with oil, food and commodity prices rising sharply, the Bank is concerned inflation will spiral in the coming months.

The US Federal Reserve has slashed interest rates from 5.25% to 4.5% in the last two months in an effort to boost economic growth. Further rate cuts are expected in coming months amid signs that the fallout from the credit crunch is far from over.

New York's Dow Jones Industrial Average fell 360 points last night, or 2.64%. It has now wiped out all its gains since the Fed made the first of its two recent rate cuts in September.

Banking shares were particularly badly hit on Wall Street with Washington Mutual, a major lender, 17% down. After the market closed, American International Group and Morgan Stanley reported further writedowns.

In Asia, Tokyo's Nikkei 225 and Hong Kong's Hang Seng index were down between 2% and 3%.

Wall Street also spooked investors in London, still reeling from last night's technical problems which left trading screens frozen at 3.50pm.