Hong Kong yesterday saw the first sign of public panic over the financial crisis when depositors besieged the International Bank of Asia (IBA) to withdraw money following rumours that it was in difficulty. The territory's three main banks, the Hongkong Bank, the Bank of China and Standard Chartered Bank, responded with a highly unusual joint statement condemning "unfounded market rumours circulating about the health of certain smaller banks".
The statement acknowledged that Asia's currency and equity turmoil was having an effect on Hong Kong but insisted its economic fundamentals were strong. "Hong Kong's banking system is robust," it said.
Yet investors across the globe have grown more concerned about the turmoil in Asian financial markets.
Shares in London made small gains yesterday, with the FTSE 100 ending 43 points higher at 4,806.8. In New York the Dow Jones Industrial Average closed down 28.7 points at 7,552.6 in edgy trading ahead of a holiday today in many markets and the Federal Reserve's key interest rate meeting tomorrow.
Stephen Hannah, head of research for Japanese bank IBJ in London, said: "There is a vicious circle. The South-east Asian crisis continues to broaden and deepen."
Concern about the Japanese economy, exposed to south-east Asia through bank lending as well as trade, has increased correspondingly. Gerard Lyons at DKB said that although the big Japanese banks were responding vigorously to their problems, the economy was in difficulty.
The Fed is not expected to raise US interest rates this week because of the fragility of the world's financial markets. But Alison Cottrell at Paine Webber said this meant fears about inflation pressures on both sides of the Atlantic would increasingly trouble investors.
"People have been talking about the Goldilocks economy - neither too hot nor too cold - with inflation tame so far. Now we are being reminded that Goldilocks is just a fairy story," she said.
UK figures yesterday showed that inflation pressures in manufacturing are negligible. Prices charged at the factory gate rose 0.1 per cent last month, edging the annual rate down to 1.2 per cent. Manufacturers' input costs fell by 0.2 per cent during the month. But the Bank of England's Inflation Report tomorrow is expected to warn there are still risks of higher inflation, pointing to the price pressures in the other four-fifths of the economy.
A survey from the British Retail Consortium yesterday underlined this concern, showing high street spending rebounded last month to the levels seen in the early summer, following a sharp dip in September.
Meanwhile, the latest Merrill Lynch Gallup survey of investors' intentions has found British fund managers undaunted by the recent volatility in stock markets around the world.
Institutional investors have turned strong buyers of UK equities, believing the 11 per cent fall in the FTSE 100 index from its peak in early October represents a good buying opportunity.
The percentage of buyers minus sellers in last week's survey of 71 institutions was positive for only the second time this year.