Almost £50bn wiped off leading British shares and huge sell-off on Wall Street amid economic fears

World stock markets 
in turmoil

Jill Treanor and Nick Fletcher

guardian.co.uk, Thursday 4 August 2011 21.36 BST

Almost £50bn was wiped off the value of Britain's 100 biggest companies on a day of global stock market mayhem triggered by a deepening of the eurozone crisis and fears for the US economy.

After a day of massive stock market falls in Europe and the US of a kind not seen since the depths of the last economic downturn, traders said the atmospherewas reminiscent of the banking crisis of October 2008. Wall Street endured one of its worst days since the height of that crisis, with the Dow Jones Industrial Index closing more than 500 points or 4.3% lower at 11,383 in heavy volume, as it resumed a two-week streak interrupted only briefly on Wednesday. It was the biggest single-day loss since 2008.

"For many traders this week has felt like the start of the banking crisis in 2008, which would go some way to explaining the panic selling we have seen today," said Will Hedden, sales trader at IG Index.

The fall on Wall Street is expected to cause further falls in the FTSE 100 index of leading shares today, after the index fell to its lowest close, 5393.14, since September 2010 yesterday. The futures market was predicting a further 100 point fall.

Rumours were swirling around the City that hedge funds were being forced to sell assets such as gold in order to cover deepening losses on other investments. This led to a surprise 1% drop in gold, which in recent weeks had hit record highs of more than £1,000 an ounce as a safe haven bet in the eurozone and US debt crisis. Brent crude fell 5% to $107 a barrel amid signs of slowdown in the west's economies.

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