Stock markets plunge again

Bear Stearns was last night bought by JPMorgan Chase for just $240 billion (£120 million) in shares, bringing 85 years of independence to a crashing end. It sent banking stocks in London and across Europe tumbling. London's FTSE 100 index of leading shares opened down more than 100 points.

The deal valued Bear at $2 a share - a massive discount to the $169 the shares hit in January last year and the $30 they sank to on Friday as it teetered on the brink of collapse.

As part of the deal, the US Federal Reserve has underwritten $30 billion of Bear's toxic subprime mortgage-backed bonds to protect JPMorgan shareholders.

Julian Jessop, chief international economist at Capital Economics, said: "The very low price paid suggests that the problems at the brokerage were even bigger than previously thought. What's more, the Fed had to provide additional financing to the participants to facilitate the deal."

The meltdown at Bear, Wall Street's fifth-largest bank, raised fears that the deepening credit crunch could claim yet more high-profile victims.

Analysts said every bank - including some of Britain's biggest - was now at risk with, Halifax owner HBOS, Alliance & Leicester and Bradford & Bingley all in the frame. Invesment banks Lehman Brothers and Merrill Lynch are also seen as vulnerable and UBS shares were down 10% in Zurich as panic spread.

The FTSE 100 index tumbled 110.7 points to 5521.0 with banking and other financial stocks leading the sell-off.

Royal Bank of Scotland fell 8%, or 261/2p to 3071/4p, HBOS was down 38p to 490p and Barclays slumped 30p to 403p.

A&L was off 24p to 4881/2p and Lloyds TSB shed 17p to 4041/4p. It followed heavy losses in Asia this morning although China's top brokerage CITIC Securities surged after it reported strong earnings and backtracked from an investment deal with crippled Bear Stearns.

The dollar plunged to new lows against the euro and Swiss franc and fell below 96 yen for the first time in 12 years. This pushed oil to a new record above $111 a barrel today while gold hit a record of $1,032.70 an ounce as investors rushed to "safe havens". US crude for April delivery was up 95 cents at $111.16 a barrel and May London Brent crude was 55 cents higher at $106.75.

Oil prices have jumped about 16% so far this year at least partly because of a steep decline in the dollar.

The rescue of Bear came alongside further US interest rate cuts as the Fed moved to prevent total meltdown.