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London News: City panic as FTSE-100 drops with a 20-year record fall Monday, 06 October 2008 Pics:Financial meltdown
Plus: Surviving the crunch
Plus: Darling warns Europe against unilateral action
Plus: City Boy's verdict on Meltdown Monday

LONDON'S FTSE 100 Index was on course for its biggest one-day fall in more than 20 years today on another day of turmoil for global stock markets.

The Footsie was down almost 9% at one stage - representing the biggest decline since the aftermath of Black Monday in October 1987.

A host of the UK's biggest banks were rocked by turmoil across the European banking sector, with Royal Bank of Scotland nursing a 22% fall.
Chancellor Alistair Darling - reportedly considering plans to shore up banks with taxpayers' cash - said today that "all practical options must remain open" in dealing with the crisis.

The Chancellor's comments failed to reassure investors as trading screens turned red across the City for the second Monday in a row.

CMC Markets analyst James Hughes said: "I've never seen anything like this. What we are seeing over the last few weeks is a once in a lifetime event."

The Footsie reached lows not seen since September 2004 today. In the US, Wall Street's Dow Jones Industrial Average traded below the 10,000 mark for the first time in more than three years.

In Asian markets Japan's Nikkei 225 average slid more than 4% to a four-year low, while in Hong Kong the Hang Seng tumbled 5% as Friday's backing of a US financial rescue was all but forgotten.

Fresh turmoil at several European banks came alongside reports that the Treasury could step in to prop up struggling UK banks with taxpayers' cash.

Just a week ago the UK's benchmark index also fell more than 5% as markets were stunned by Bradford & Bingley's nationalisation.

Manoj Ladwa, senior trader at ETX Capital, said: "Black Mondays used to be a once-a-decade event - now they're coming along more regularly than a London bus."

In London, investors were unnerved by reports that the Government could take big stakes in banks - effectively part-nationalisation - to strengthen their finances.

HBOS, soon to merge with Lloyds TSB, plunged as much 21% in the sell-off, while Barclays fell 14%.

Analysts warned that public stakes in banks - while offering some security - could result in existing shareholders being diluted.

The banks were under pressure after German lender Hypo Real Estate became the latest to receive state aid.

Italy's largest bank, Unicredit, also warned on profits after announcing asset sales and plans to shore up its balance sheet with a 6.6 billion euro (£5.1bn) boost.

Meanwhile, French bank BNP Paribas agreed to buy a majority stake in struggling bank Fortis - which is already part-nationalised.

Elsewhere, Iceland's stock exchange suspended trading in shares of six major banks as its Government works on an economic rescue plan. Russia closed its own market following a 15% tumble.

The London market was also hit hard by hefty falls from heavily-weighted mining stocks after experts warned that the sector's earnings could almost halve this year.

Oil prices plunged to an eight-month low below 90 dollars a barrel at one point amid fears over the impact of a deep recession on demand.

Market analysts said trading was chaotic as panicky markets reacted to the weekend's developments.

Tom Hougaard, chief market strategist at City Index, said: "We have a seriously weak and fear-driven market at our hands."

Pics:Financial meltdown
Plus: Surviving the crunch
Plus: Darling warns Europe against unilateral action
Plus: City Boy's verdict on Meltdown Monday
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