Recession fears see markets plunge

London's FTSE 100 closed down 5.35 per cent today, plunging to a five-year low of 3861. Other European indexes also slumped, while Tokyo's Nikkei index fell 11 per cent - its worst performance since 1987.

After recording its worst one-day percentage fall since October 1987 yesterday, New York's Dow Jones suffered a further sharp drop today after opening. But by 7pm BST it had recovered most of the day's losses.

The FTSE's fall came as unemployment figures rose at their fastest level for almost two decades, within sight of the politically sensitive 2m mark, and as Gordon Brown's banks bail-out looked in danger of unravelling.

Lloyds TSB are beseeching the Government to allow them to pay out dividends to shareholders other than the taxpayer, as institutions have been selling up their stakes in the bank, which is soon to take over HBOS. The Chancellor Alistair Darling last night maintained that the banks deal would stay as it was originally agreed.