At one time the FT-SE 100 index had plunged 74.9 points and seemed to be heading for another hair-raising fall.
German money supply figures, seemingly killing off any hope of a near-term interest rate cut, and more worries about the US economy had bond markets in ragged disarray with heavy US selling causing much of the distress.
Talk, yet again, of a leading US bank suffering in the derivatives market added to the anxiety. Bankers Trust, said to be the casualty, denied any difficulties.
Nerves in an already weak futures market were raw after increased margin requirements were demanded in respect of some Liffe contracts.
The highly unusual move by the London Clearing House was aimed at preventing default by any LCH members should large losses be incurred in the sudden change of mood which has engulfed markets this year. The demand is seen as an indication of fears that trading will remain volatile.
For the first time for 12 weeks the 100 index for a time was below 3,200. There were even mutterings that it was on its way to 3,100.
But the equities slump was due almost entirely to market-makers taking defensive positions. There was little selling.
Quickly it became apparent the retreat had been far too steep. Slowly but surely shares were squeezed from their low points with a few bargain-hunters enjoying an exaggerated influence. A New York recovery from a pitifully weak opening helped Footsie to end just 22.5 lower at 3,248.1.
Even the bond markets stopped shivering with government stocks, at one time more than three points down, ending with gains of more than a quarter-point.
Gilts were helped by news that the Federal Reserve had supplied funds to the US money market, indicating a more relaxed approach than many expected.
The devastation in the bond markets in the past week has not been seen since the crash of 1987, with worries about upward pressure on US interest rates doing the damage.
Hopes that the Bank of England may attempt to put the markets out of their misery with another interest rate cut gained strength as the session proceeded.
Such a move would help the Government's funding requirements. But the German money supply figures seem certain to restrain any move at today's Bundesbank meeting to lower rates.
Financial shares were not, surprisingly, in the heat of the action. Smith New Court, down 8p at 402p, added to the discomfort of merchant banks by suggesting that Schroders, off 60p at 1,128p, and SG Warburg, down 34p at 854p, should be sold. Schroders' fall leaves it in danger of losing 100 index membership.
Clearing banks were hit. Discount houses, exposed to gilts and futures markets, were lowered with Cater Allen down 30p at 570p.
United Biscuits, a long-running takeover candidate, ignored the rest of the market, ending at 348p, up 3p. The shares have showed considerable strength in the recent upheavals. William Morrison, another takeover favourite, eased 1.5p to 113.5p. This usually quiet stock was again briskly traded.
Forte, the hotel group, was another to shrug off the gloom. The shares rose 5p to 264p with talk growing that a deal is near over its involvement in the Savoy Hotel.
One suggestion is that Forte will pump its upmarket properties into Savoy, which would then become a quoted offshoot.
Rank Organisation, meeting Scottish investors, gained 10.5p to 1,081.5p and BAT Industries, helped by continuing Warburg support, rose 16.5p to 480.5p.
Grand Metropolitan drew strength from bullish comments at the shareholders' meeting on Tuesday, gaining 13.5p to 481.5p.
Serco, the business support group, gained 117p to 1,450p on its results. Speculative interest lifted Computer People 20p to 165p.
Clayton Son & Co, an engineer, rose 14p to 127p on the takeover bid and downgradings lowered James Wilkes 5p to 163p.
Builders and building material shares were prime sufferers in the markdown with Barratt Developments, at one time off 11p, ending 6p lower at 267p. RTZ, riding near its peak, felt the weight of Smith New Court's take-profits advice. The shares fell 21p to 846p.
Silentnight eased 3p to 352p. On Tuesday it said year's profits would be marginally ahead of last time's pounds 12m but below market hopes of around pounds 13.5m.
Danka Business Systems, down 12p at 362p, reported that US shareholders now accounted for 66.31 per cent of its capital. It is rumoured to be interested in Southern Business Systems, up 3p at 98p.
Regent Inns held at 256p. It sold seven pubs for pounds 1.43m as part of its policy of concentrating on large drink outlets.
Expect action soon at Waterglade International, the struggling property group. A cash-raising exercise, intended to pull in about pounds 7m, is thought to be planned through a placing and open offer. The issue price could be 1p against 3p in the market. The move represents the final part of the restructuring undertaken by David Cunningham and Tom Megas.
Dealings under the 535 facility have started in a Canadian oil and gas group, Terrenex Ventures. It has a 50 per cent interest in an intriguing British group, JP Kenny, with four oil and gas ventures in the former Soviet Union. A Kenny company has just completed a deal to develop fields in Ukraine. Kenny is expected to seek a quote next year. Terrenex shares are 83p.
The FT-SE 100 index, down 74.9 points at one time, ended 22.5 lower at 3,248.1. The FT-SE 250 index lost 42.8 to 3,901.8. Turnover was 763 million shares from 32,965 deals. The account ends on 11 March, with settlement due on 21 March.Reuse content