STOCK markets worldwide were gripped by fear yesterday as London's FTSE 100 Index came to the end of its worst week since the Black Monday crash of 1987.

Investors stampeded for the exits as recession panic and concerns over fragile banks sent the Footsie tumbling 8.9% - surpassing even Monday's record.

The Footsie had plummeted 21% over the week - wiping more than pounds 250bn off top-flight stocks in the process.

The index eventually finished below the 4,000 mark at 3932.1 - its lowest close for more than five years.

The 21% fall compared to the 22% which was wiped off London's leading shares in the aftermath of Black Monday.

Following heavy overnight declines in Asia, screens turned red in the City as the London market approached falls of 10% at one stage. A dire start to US trading offered no respite.

The Dow Jones Industrial Average, which fell more than 7% on Thursday, tumbled 8% during a volatile early session.

City watchers were confounded by the falls ahead of crisis talks among the G7 finance ministers this weekend. David Jones, chief market strategist at IG Index, called it "another ugly day".

"There is a real sense of despair... it is difficult to see what can be done to effect a handbrake turn in sentiment in the short term," he said.

CMC Markets' James Hughes said: "It is just utter panic."

Across Europe, France's CAC 40 and Germany's Dax showed losses of 7% and 8% respectively.

In London, banking stocks were among the biggest victims as speculation mounted over the billions they may need to strengthen their finances.

Royal Bank of Scotland lost 25% yesterday - 61% over the week - and Halifax Bank of Scotland fell 19% - 37% over the week. Barclays tumbled 14%, making a 42% slump in the past seven days.

Manoj Ladwa, senior trader at ETX Capital, said: "Markets are normally held in equilibrium by the balance of fear and greed. But at the moment, greed has gone into hiding and fear rules the roost."

The sell-off sent the value of safe havens such as gold up by as much as 4% as investors took their money out of volatile stock markets.

There was little sign that Government efforts to rescue banks on Wednesday with a pounds 400bn package of capital and guarantees had begun to thaw the frozen money markets.

Alongside the crisis-hit banking sector, heavyweight mining stocks plunged as base metal prices headed down-hill and panic grew over a potential global recession.

On Wednesday, the International Monetary Fund issued a fresh warning that Britain was on the brink of recession - predicting in its latest World Economic Outlook report that the economy would contract by 0.1% next year as growth across the developed countries slowed to almost zero.

In London, mining firm Vedanta Resources led a retreat for the sector - down 13% - as investors worried over falling demand for metals and minerals.

The same factor was hitting crude oil, which was trading below 80 dollars a barrel for the first time in a year.

In New York, crude for November delivery reached a low of 78.61 dollars - little more than half the 147 US dollars a barrel it peaked at less than three months ago. Brent crude was as low as 75.08 dollars a barrel in London.

The falling crude prices weighed on petrochemical heavyweights BP and Royal Dutch Shell, which fell 8% and 9% respectively. Only one Footsie stock finished in positive territory - media group Thomson Reuters.

There is a real sense of despair... it is difficult to see what can ... effect a handbrake turn

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