Experts warned that plummeting shares and currencies in the countries only recently described as "tiger" economies could be the trigger for the biggest stock market fall in 10 years.
"There are many parallels between 1987 and 1997, but what has been missing so far is the catalyst for the correction. This turmoil in Asia could be it," said Gail Dudack at investment bank UBS in New York.
The FTSE100 index in London fell for the sixth day out of seven, ending 28 points lower at 4,817.5. There were steeper falls in shares in Paris and Frankfurt, while on Wall Street the Dow Jones index recovered from an initial 88- point plunge.
This bout of nerves followed what traders described as a "meltdown" in Asian stock markets, with a 5 per cent drop in Hong Kong share prices in its busiest day's trading ever, and a record one-day decline in Indonesia. Singapore, Malaysia, the Philippines and Thailand - the country where the crisis originated - were almost as badly affected.
Hong Kong - so far little affected by the crisis - is seen as the most likely conduit for transmitting turmoil to the rest of the world. British pension funds have more money invested in Asia than in the US, and it is easiest for them to withdraw it from the former colony.
It took the reported intervention of the Sultan of Brunei to restore some calm in the Far East. Earlier in the week he promised to help the countries affected by the currency turmoil, and traders said yesterday that Brunei's investment agency had been selling dollars for the Malaysian currency, the ringgit.
Japan, which sells more than 40 per cent of its exports to other Asian countries and whose banks are heavy lenders in the region, could easily be plunged back into recession by the crisis.
The US and European economies are less directly vulnerable to a slowdown in the tigers' once-spectacular growth rates. But if Wall Street and other stock markets do crash, the impact on the economy would be severe.
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