US shares at nearly 12-year low

The Dow Jones is at its lowest since 28 October 1997

US shares have fallen sharply on concerns about the government's latest attempts to shore up the banks.

The Dow Jones Industrial Average closed down 250.9 points, or 3.41%, at 7,114.8, its lowest since October 1997.

But shares in the banks themselves rose sharply, with Citigroup up nearly 10% and Bank of America rising over 3%.

The US government reiterated its determination to keep banks operating, but added it wanted the banks themselves to stay in private hands.

There had earlier been reports that the government was planning to take a bigger stake in Citigroup and could even nationalise it.

"People left and right are throwing in the towel," said Keith Springer from Capital Financial Advisory Services.

"The biggest thing I see here is the incredible pessimism - the government is doing a lousy job of alleviating fears."

Technology shares also fell on reports that a reorganisation is planned at Yahoo.

The technology-based Nasdaq index fell 53.5 points, or 3.71%, to close at 1,387.7.

The falls pick up from a tough week last week, when all the major indices fell by more than 6%.

Earlier in the day, the FTSE 100 in London closed down 1%, the Cac 40 in Paris fell 0.8% and the Dax in Frankfurt fell 2% to close below 4,000 points for the first time since 2004.