Post-election uncertainty, the continuing eurozone sovereign debt crisis and incredulity about US stock market volatility combined to send share prices plummeting again yesterday, with the FTSE 100 index falling 138 points, or 2.6 per cent.
The falls capped a dismal few days for the UK stock market, which has now declined by 8 per cent since the bank holiday weekend. The FTSE 100's losses were the worse seen in a single week since the collapse of Lehman Brothers in 2008.
While the market was spooked by anxieties about a hung parliament, investors also took fright at further declines on European exchanges. Shares in France, Germany and Spain fell 4.6, 3.2 and 3.3 per cent respectively. The US stock market also continued its volatile run after the extraordinary plunges seen on Thursday afternoon. The Dow Jones opened down, with losses reaching 3 per cent at their worst, before the market began to recover, closing in on positive territory by lunchtime.
Regulators in the US promised an inquiry into Thursday's turmoil, which saw anxiety about the Greek debt crisis suddenly spiral into the worst plunge in the Dow Jones Industrial Average's history – only to rebound within half an hour.
The wild ride, in which the shares of several major companies sold for close to zero, left market professionals bewildered and nervous, and sparked recriminations between exchanges.
It was announced yesterday that trades in scores of different shares would be cancelled, and that the Securities and Exchange Commission, which regulates the stock market, and the Commodity Futures Trading Commission, which regulates stock-market derivatives, would try to get to the bottom of the chaos.
Fingers were immediately pointed at the super-fast computer-based trading programmes on the formal stock exchanges and on opaque trading platforms called "dark pools".