Investors' confidence battered

Investors' confidence was hit from all sides today as the health of Europe's banking sector moved deeper into critical territory.





The FTSE 100 Index was 2.6% lower, closing below the 5,000-point mark for the first time since July 2010, after a shock profit warning from Germany's Deutsche Bank added to fears of a Greek debt default.



The Deutsche bank update also came as French and Belgian officials fought for the future of Belgian lender Dexia, as it buckles under the weight of its exposure to Greece's burgeoning debt pile.



EU finance ministers earlier said Greece will have to wait until November for its next eight billion euro (£6.8 billion) bailout loan after the country said it would miss its deficit-reduction targets.



Elsewhere, official figures showed a decline in US factory orders in August, with the worse-than-expected figures fuelling concerns over the health of the world's largest economy.







London's leading shares index last Friday closed its worst quarter in nine years, which saw around 14% or £212 billion wiped off its value as the eurozone debt and banking crises snowballed.



Britain's top 100 companies saw £34 billion wiped from their value from today's falls alone after alarm bells over the health of Europe's banks continued to ring.



Michael Hewson, analyst at CMC Markets, said: "The continued uncertainty and instability in Europe continues to act as a cancer on risk appetite."



Deutsche Bank - one of the world's largest banks - said its third quarter earnings would be substantially lower than expected due to market turbulence and more charges on Greek government debt.



Meanwhile, the governments of France, Belgium and Luxembourg vowed to prop up Dexia bank and insure every cent of its deposits as its share price continued to slide on the Brussels Stock Exchange.



The bank may be forced to spin off assets in order to shore up its balance sheet after its credit rating was put under review.



Manoj Ladwa, senior trader at ETX Capital, said: "Action regarding sovereign debt will need to come sooner than later as what began on the periphery of the eurozone seems to be spreading to the core."



Elsewhere, investment bank Goldman Sachs hit sentiment as it forecast a "mild recession" for the eurozone area.



The banking sector dragged the London market lower as a result, with Barclays down 8%, Royal Bank of Scotland off 1% and Lloyds Banking Group dropping 2%.



A speech from US Federal Reserve chairman Ben Bernanke had no immediate impact on the US market, where Standard & Poor's 500 Index fell into official "bear market" territory, defined as a 20% fall from the highs in April.



Mr Bernanke suggested the Fed might take more emergency action - such as increasing its quantitative easing programme - to revive the US economy.



But fears over Europe, weak factory order data and doubts over the solvency of American Airlines owner AMR all dampened the mood on the other side of the Atlantic.



The bleak outlook raised fears of a global recession, which put oil prices under pressure as Brent crude in London dipped below the 100 US dollars a barrel mark for the first time in nearly two months.

PA

Start your day with The Independent, sign up for daily news emails
News
Legendary blues and rock singer Joe Cocker has died of lung cancer, his management team as confirmed. He was 70
people70-year-old was most famous for 'You are So Beautiful'
News
people
Sport
Chelsea manager Jose Mourinho
footballLatest score and Twitter updates
Arts and Entertainment
David Hasselhof in Peter Pan
The US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'