Mini-recovery after markets hit lowest level for six years

The London stock market staged another rally this morning, gaining more than 90 points in the first hour after yesterday tumbling to a six-year low and wiping £48bn off the value of leading shares.

Stock prices yesterday tumbled on both sides of the Atlantic, as well as across Europe and Asia, as the weakening confidence in the economy and in the wider business culture threatened to turn into a full-scale panic. The FTSE 100 index of blue-chip shares crashed 203 points to close at 3,896, its lowest point since September 1996.

The 5 per cent fall was almost as steep as the drop in the wake of the 11 September attacks.

On Wall Street, the benchmark Dow Jones index fell another 3 per cent to close below 8,000 for the first time since October 1998, after another seesaw session. For the third time in a fortnight, President George Bush tried to talk the market higher, but to no avail. The Dow has lost more than 1,300 points, or 15 per cent, since Mr Bush's 9 July speech on Wall Street, which had been billed as an effort to boost investor confidence.

The UK market, meanwhile, has lost 44 per cent since its peak of 6,930 in 1999. Although this is one of the worst bear markets since the 1970s, some market analysts believe the FTSE 100 could fall as low as 3,000.

This latest fall has almost certainly ruled out a rise in UK interest rates next week and will fuel calls for a further cut, which would take borrowing rates to their lowest for 50 years.