Markets braced for more turmoil

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The US investment bank, which lost billions in the credit crunch, filed for bankruptcy after weekend rescue efforts foundered.

The news sent London's benchmark FTSE 100 Index plunging nearly 4% and forced the Bank of England to pump an extra £5 billion into panicked money markets.

On Monday night Wall Street saw its worst points fall since the 9/11 terror attacks, the Dow Jones index sliding 504.5 points, or 4.4%, as investors reacted badly to the meltdown of Lehman and Merrill Lynch.

Analysts predicted the downward slide would continue during Tuesday.

Tom Hougaard, chief market strategist with City spread-betting firm City Index, said he expected the pressure on traders to sell to continue unabated.

"We're going to have more of what we had yesterday," he said.

"More selling pressures, more falling of banking stocks, more HBOS (Halifax Bank of Scotland) bad news, more more more more more.

"I always look at the last hour of trading, because that's when the real pros come out. If they were buying, good, but they were all selling. We're on a crash pattern, there's no doubt about that."

The FTSE 100 could fall to the 5,000 mark, and the Dow Jones as low as 10,500, before the low was reached, he warned.