On Tuesday London's main FTSE 100 share index posted its biggest one-day fall since the terrorist attack on the Twin Towers in America.

Asian markets have followed with Japan's Nikkei index closing down 5.7%, taking its decline this year to 18% and global indexes are predicted to fall further in coming weeks. The Indian stock market was closed to trading for an hour after it fell nearly 10% in a few minutes.

Similarly the French and German markets had their worst day for seven years.

The falls were triggered by growing fears of a global recession, after concern that a proposed £76bn US tax-cutting package to stimulate the economy might be too little, too late.

A spokesperson for the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world would suffer in the wake of a slowdown in US growth.

Some commentators have blamed hedge funds for exacerbating the situation by selling short i.e. selling shares that they don’t have in the hope that they will be able to buy them back more cheaply at a later date