Stock markets plunge into turmoil once again after shares nosedive in Asia

The FTSE 100 index, which seven days ago took its biggest one-day plunge since the 9/11 terrorist attacks in 2001, and continental exchanges were again marked down heavily today after another major sell-off in the Far East overnight.

The blue-chip index in London was down as many as 93 points at one stage but has fought its way back to 67.7 points down at 5801.3

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Asian markets had taken their cue from a sharp fall on Wall Street in late Friday trading.

Following the US Federal Reserve's shock three-quarterpoint cut in US interest rates to 3.5 per cent on Tuesday, many fear that another rate reduction when the Fed goes into a scheduled meeting tomorrow will signal the true extent of America's woes.

Before then, the US is going to get statistics on latest housing starts, which are seen as a major barometer of the American economic climate, and details from the White House's $150 billion (£75.6 billion) fiscal bailout for the nation.

Stock-market watchers fear a repeat of the 1987 crash when indices were hit by several days of shock-wave falls.

"The increased levels of volatility for equity markets looks set to continue in the near term," said CMC Markets trader Matt Buckland.

The growing global panic was not helped by comments from the head of the International Monetary Fund, who said interest rate cuts alone would not be enough to get the worldwide economy moving again.

"I don't think we would get rid of the crisis with just monetary tools," said Dominique Strauss-Kahn, the IMF's managing director.

In a dramatic demonstration of how deep the crisis may be, Strauss-Kahn, a former French socialist finance minister, said he expected greater State interventions around the world to boost domestic economies.

"A new fiscal policy is probably today an accurate way to answer the crisis,î said Strauss-Kahn, who added that he

believed it to be a "serious slowdown [which] needs a serious response".

In Tokyo, the Nikkei Average plunged 4 per cent as the index factored in the teetering US economy into fears that its own economy is slipping into a downturn.

The shares sell-off was more marked in China, where both the main exchange in Shanghai and the Hang Seng index in Hong Kong were badly hit, posting falls similar to a week ago.

Weighing heavily on Chinese sentiment-is the effect on Chinese-made products that a US recession might have.

The Shanghai Composite was down 342.39 points, or 7.2 per cent, at 4419.29 while the Hang Seng was off 1068.76 points, or 4.3 per cent, at 24,053.61.

Main European indices were in reverse again with the CAC in Paris and the Frankfurt-based DAX both beating the retreat.

The CAC was down 107.35 points, or 2.2 per cent, at 4770.77 while the DAX fell 131.65, or 2 per cent, to 6685.09.

In London, after a volatile opening hour, the Footsie stood 69.6 points lower at 5796.3.

Investors around the world have been jittery for weeks about a US slump, which would weaken demand for exports and drag on global growth.

Building supplies firm Wolseley, which does half of its business in the US, was among the Footsie fallers, with shares off 27p to 702.5p.

Housebuilders followed suit, with Charles Church firm Persimmon down nearly 4%, or 30.5p to 795.5p. And Taylor Wimpey was down 6.3p to 187.1p.

Banks were also on the back foot amid the gloomy economic sentiment, with Lloyds TSB down 11.25p to 418p. Barclays slipped 11p to 476.5p, and Royal Bank of Scotland was 11p lower at 380p.

Mining giant Xstrata led the risers board after talk of a bid for the metals producer from Brazil's Vale group. Shares were up 4% or 95p to 3597p.

Also department store chain Beale painted a gloomy picture today after posting full-year losses and said it expected "another difficult year".

The firm, which operates 11 stores, said wider economic troubles and higher costs were likely to hit earnings until at least 2009.

Beale's downbeat outlook came as it reported pre-tax losses of £1.4 million for the year to November 3, down from profits of £324,000 the previous year.

It has already warned that this year's trading will miss targets after a dire Christmas and today confirmed it was "extremely" cautious over prospects for the year ahead.