Shares index battered by £35bn slump

London’s FTSE 100 Index slumped 2.3 per cent, or 133.9 points, to 5584.5 – its lowest level since November when markets crashed amid Ireland’s £72bn bailout. It was also the index’s biggest daily fall since November.

The Dow Jones Industrial Average in New York also fell by 0.8 per cent in early trading over renewed fears that America’s economy is heading for recession, but staged a small recovery. The fears were fuelled by speculation the world’s largest economy will be damaged by recently agreed budget cuts.

Rising Spanish and Italian government borrowing costs also reignited fears that the global market turmoil will push the two countries closer toward a bailout.

Market report: Business Thursday, Page 2.