Fear of double-dip recession grows as global share prices plummet

£64 billion was wiped off the value of Britain's leading shares yesterday as panic about the prospect of a double-dip recession gripped global markets.

Every share in the FTSE 100 index of top companies fell as alarm over stagnating European output and a slowdown in China was piled on top of grim news for the ailing US economy.

The tumbling share prices spell dire news for Britain's pension funds and are evidence of collapsing economic confidence. The prospect of a second severe recession threatens British families with job cuts, falling living standards and renewed falls in house prices.

Faced with dreadful news from Europe, the US and Asia, traders sold shares and piled money into safe havens such as US government bonds. Investors, already worried about a possible Greek debt default and the eurozone's debt crisis, have lost faith in governments' ability to take action to avert an economic meltdown. Christine Lagarde, head of the International Monetary Fund, warned that the global economy was heading for "a dangerous phase" and called on governments to work together to ward off the impending crisis as they did in 2008.

The blue-chip FTSE 100 plunged 4.7 per cent, the biggest drop since March 2009 when markets were in the depths of the financial crisis. In New York lunchtime trading the Dow Jones Industrial Average was down 3.6 per cent. Hong Kong's Hang Seng index closed down 4.9 per cent and Japan's Nikkei 225 fell 2.1 per cent.

A survey of European companies showed activity grinding to a halt and the eurozone on the brink of a fresh recession. The dire news from Britain's biggest trading partner followed a warning by the US central bank late on Tuesday that the world's biggest economy was in trouble.

The global panic extended to Asia where Chinese industrial activity slowed for the third month running. In Britain, manufacturing output slowed more severely than expected, adding to fears that the economy is already flatlining as the Government's austerity measures kick in.

Business, page 40