21st July 2011
Stocks fell heavily in Europe and North America while gold rose to a new record of more than $1,600 (£995) an ounce amid concerns that Thursday's emergency summit of EU leaders would once again fail to resolve the debt problems of the single currency's weak members.
Lloyds, Royal Bank of Scotland and Barclays were the biggest fallers on the FTSE 100, all losing at least 6% of their value.
The threat of a stock market crash is escalating, according to the chief executive of the respected Centre for Economics and Business Research, reports the Daily Telegraph.
The threat of a stock market crash has risen to a "one in three" chance, said Douglas McWilliams, as reported on IFA Online.
He said: "The signals seem to be building up for some kind of market crash – shares and many bonds are already down significantly from their recent peaks. At the beginning of this year we gave one-in-five odds on a UK double-dip. The chances now are about one-in-three."
The FTSE has dropped sharply from a peak of more than 6,000 in early July; while the price of Greek and Italian bonds has fallen off a cliff, as investors prepare for a possible default, reports the Daily Telegraph.
Mr McWilliams said. "The real fear is that the main economic weapons were used up to deal with the last crisis. There is no scope for reducing interest rates and printing money is regarded with scepticism, though it may yet prove the only option."
Deutsche Bank analysts said last week that global stocks could plunge as much as 35% if the crisis spirals.
A recent Deloitte survey also showed that one-in-three finance directors of FTSE 100 and FTSE 250 companies believes the UK economy will fall back into recession.
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