The FTSE 100 closed down 4.5 per cent to 5092 today on the back of fears about a double dip recession and poor manufacturing data in America.
By midday in America the Dow Jones was down 3.55 per cent at 11,006 and the S&P 500 was down 3.72 per cent to 1149.
UK banks have been hit hard with Lloyds falling 9 per cent, Royal Bank of Scotland down 7 per cent and Barclays down 11 per cent.
Morgan Stanley announced today that it was cutting its growth expectations for Europe due to weaker than expected growth in the second quarter and a number of new factors likely slow growth in the second half of the year. It now expects GDP growth to average 0.5 per cent next year.
In a briefing note, the firm says: “Instead of the euro area growing at a stall-speed of around 1 per cent over the winter, we now expect stagnating economic activity. While not our base case, at this stage, we see a material risk of outright recession.”