European share indexes have fallen further, as fears of a global recession swept through the major markets.
US shares have fallen in early trading on Wall Street, as a slew of weak corporate earnings further increased fears that a recession is on the way.
The FTSE-100 index was down 2.5% or 99.7 points at 3941.2 by early afternoon, with France's Cac 40 down 3.3% and Germany's Dax down 3.8%.
With investor sentiment also hit by a higher-than-expected rise in US unemployment, the main Dow Jones index was down 41 points or 0.5% to 8,479.
UK retail sales grew at their slowest rate in two-and-a-half years in September, a sign of tough conditions.
Firms releasing subdued trading figures included Dow Chemical, which said a global recession was likely for 2009.
Sterling also remained under pressure - close to a five-year dollar low - as traders anticipated more rate cuts.
Wall Street's falls echoed earlier declines in both Europe and Asia.
'Credit tsunami'
Frail investor confidence was also knocked by a speech by former Federal Reserve boss Alan Greenspan, who said the world was continuing to face a "once-in-a-century credit tsunami" which would have a severe impact on the US economy.
DOW JONES INDUSTRIAL AVERAGE: 23 October 2008*All Times GMT
"The market is coming to grips, after being in denial for so long, with a global recession, and to our eyes, we've thought we've been in recession for just about a year now," said Barry Ritholtz, director of equity research at Fusion IQ in New York.
"Now the question is, is this going to be a more serious recession, is this going to be deeper, longer, more prolonged than previously expected."
Another weak US trading statement came from Starwood Hotels, which predicts that it will see room occupancy fall in the last three months of the year.
Meanwhile, United Parcel Service predicts its deliveries for the same period will fall 4%.
European declines
The UK's FTSE 100 was down 87 points or 2% at 3,953 in afternoon trading in London, while Germany's Dax was 102 points or 2.2% lower at 4,469.
FTSE 100 INDEX: 23 October 2008*All Times GMT
FTSE 100 INDEX: 23 October 2008*All Times GMT
Investors are concerned about the global economy and how long the financial crisis will endure. Key recent market developments:
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Sterling
stayed near the five-year low of $1.6148 reached on Wednesday, trading at about $1.6299
South
Korea's Kospi index fell 7.4%, its lowest close since July 2005. The Korean won lost 5% of its value against the dollar
Hong
Kong's Hang Seng index was down 4.7%, at its lowest ebb since April 2005
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At
one point, the Nikkei was trading at 8,016.61, its lowest level for more than five years. It recovered to close down 213 points or 2.5% at 8,460 points
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The
yen strengthened against the dollar and the euro overnight. The dollar hit a seven-month low of 96.85 yen, while the euro hit a six-year low of 123.40 yen
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Indian
shares opened down 4.8% at their lowest since June 2006. The rupee has so far shed nearly 21% against the dollar in 2008
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In
Australia, the benchmark index closed down 4.4%
The
Dow Jones index closed down 5.7% on Wednesday.
The FTSE's falls came after figures showed that UK retail sales grew at their slowest rate in two-and-a-half years in September, a sign of tough conditions.
DAX INDEX: 23 October 2008*All Times GMT
Sterling also remained under pressure - close to a five-year dollar low - as traders anticipated more rate cuts.
Export fears
Investors are now increasingly concerned about the global economy and how long the financial crisis will endure. In other key market developments:
class="bulletList">
Sterling
stayed near the five-year low of $1.6148 reached on Wednesday, trading at about $1.6299
South
Korea's Kospi index fell 7.4%, its lowest close since July 2005. The Korean won lost 5% of its value against the dollar
Hong
Kong's Hang Seng index was down 4.7%, at its lowest ebb since April 2005
At
one point, the Nikkei was trading at 8,016.61, its lowest level for more than five years. It recovered to close down 213 points or 2.5% at 8,460 points
The
yen strengthened against the dollar and the euro overnight. The dollar hit a seven-month low of 96.85 yen, while the euro hit a six-year low of 123.40 yen
Indian
shares opened down 4.8% at their lowest since June 2006. The rupee has so far shed nearly 21% against the dollar in 2008
In
Australia, the benchmark index closed down 4.4%.
The fall in Japanese stocks overnight was triggered in part by weak export data.
The impact of the global slowdown has had a clear impact on Japan's exports Tatsushi Shikano, Mitsubishi UFJ Securities
Japan's trade surplus plunged 94% to 95.1bn yen ($970.1m; £596.7m) in September and exports grew only 1.5% in September from a year earlier, far below forecasts.
Exports of Japanese cars to the US fell, a sign of slowing consumer demand in the world's largest economy.
The continued strength of the yen prompted fears that this will cause further damage to already weak exports.
"The impact of the global slowdown has had a clear impact on Japan's exports and this was even before the financial crisis erupted in September," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities.
"Sluggish export volumes will put a drag on Japan's industrial output and its export-reliant economy in the coming months," he added.
