Page last updated at 20:51 GMT, Tuesday, 7 October 2008 21:51 UK

US stocks sink to five-year low

Specialist Igor Lerner, left, directs trades at his post on the New York Stock Exchange floor
World stock markets have seen mixed performances.

US stocks have hit their lowest levels in five years as fears grew that the financial crisis would trigger a deep economic recession.

World stock markets have seen mixed performances in Tuesday trading as investors continued to worry over the strength of financial institutions.

London's FTSE 100 and France's main stock index ended higher.

But US stocks took fright after Federal Reserve Chairman Ben Bernanke said the US economy looked set to deteriorate.

The Dow Jones industrial average sank 508.39 points, or 5.1% to end at 9,447.11. It has lost more than 1,400 points over the past five sessions, nearly 13% of its value.

The broader S&P 500 index fell to its lowest level since September 2003 at 996.25 points.

'Historic dimensions'

Having shed 7.8% on Monday, the key London FTSE 100 index closed up 0.35% despite HBOS and Royal Bank of Scotland both losing more than 30%.

France's Cac 40 index, which lost 9% in the previous session, ended 0.55% higher.

The Federal Reserve will need to consider whether the current stance of policy remains appropriate
Ben Bernanke, Fed chairman

Earlier, Japan's Nikkei 225 index sank more than 5% before recovering slightly to close down 3%.

However, Australia's financial markets rallied after the country's central bank cut its official interest rate from 7% to 6%.

Fed chairman Mr Bernanke said the US was tackling a financial crisis "of historic dimensions" and signalled that the central bank might be prepared to cut interest rates to support the economy.

He said the outlook for inflation had improved as oil and other commodity prices had fallen.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Mr Bernanke said.

Main developments on Tuesday included:

  • US President George W Bush called for co-ordinated action by leading industrialised countries to tackle the worldwide credit crunch
  • The UK government is poised to announce details of a comprehensive rescue package for the banking system
  • Spain, Belgium and the Netherlands have significantly increased the amount of savers' deposits they will protect
  • European Union finance ministers agreed to increase the guarantee for customers' bank savings accounts to at least 50,000 euros
  • The Icelandic government took control of the country's second biggest bank, Landsbanki, which owns UK internet bank Icesave
  • Taiwan said that it would fully protect depositors' savings should a bank fail
  • The US Federal Reserve announced plans to buy massive amounts of short-term debt from companies in an effort to unfreeze the money markets

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