A fresh sell-off after last night's rejection of the $700bn (£388bn) bank bail-out sent London's leading shares on a jumpy ride today.
London's FTSE 100 Index initially slumped nearly 3 per cent to 4675 - its lowest point since December 2004 - in the wake of the US House of Representatives' shock decision.
It fell a little within the first hour to 4787 (down 1per cent). Then at 9.15am it was up 21.82 at 4840.
Some of the UK's biggest banks were again the biggest casualties of the sell-off, which followed a fall of more than 5 per cent for the Footsie yesterday.
Halifax Bank of Scotland was down 12 per cent, while Lloyds TSB - which has agreed to take over the struggling bank - fell almost 6 per cent. Royal Bank of Scotland shed 8 per cent and Barclays lost 3 per cent.
The latest stock market hammering comes amid fears that the refusal to agree US Treasury Secretary Henry Paulson's plans to take the toxic bad debts from banks' balance sheets could completely seize up the financial system - plunging global economies into a deep recession.
Yesterday the turmoil claimed its latest UK victim - mortgage lender Bradford & Bingley was broken up and nationalised - while other banks in Europe and the US also sought state bail-outs and rescue takeovers.
The uncertainly left City experts urging investors to shun most UK banks with the turbulence set to continue.
Collins Stewart analyst Alex Potter said: "We believe the Paulson failure will exacerbate weakness in the near-term and would only buy the safe-haven stock, HSBC."
Heavyweight stocks such as oil giants BP - down 3 per cent - and the Footsie's several mining companies also dragged the index lower amid concerns that a recession would hit demand for commodities.
Crude oil for November delivery plunged to 96 US dollars a barrel overnight and has now fallen by 25 dollars in the past week.
As ministers began to arrive at 10 Downing Street for the weekly Cabinet meeting, Governor of the Bank of England Mervyn King emerged, unsmiling, and left in his waiting car without speaking to reporters.Reuse content