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Panic selling gets grip on markets

The stockmarket saw the biggest fall since 9/11 this week as the FTSE 100 index plunged as low as 5,339 on Tuesday morning, wiping over £77bn off share values.

The FTSE 100 index fell by 5.5 per cent from 5,901 to 5,578 on Monday.

Panic selling saw the index fall to 5,339 after the markets opened on Tuesday morning before recovering to 5,707 later in the day.

Between December 21 and January 21, the index has fallen by nearly 13 per cent from 6,406 to 5,578.

In a shock move on Tuesday, the US Federal Reserve cut interest rates by 75 basis points from 4.25 per cent to 3.5 per cent on Tuesday in a bid to improve market confidence.

Leading fund managers say this week was the worst case of panic selling they have seen in years.

Cazenove co-head of multi-manager team Marcus Broo-kes says: “When the markets opened on Tuesday morning, it was the most panic I have seen in five or six years but it stabilised back from that level.

“There will be a persistent weakness in the markets for the next couple of weeks. What we are seeing is a mid-cycle slowdown. The probability of a recession has risen.”

Fidelity head of investment strategy Michael Gordon says: “My suggestion is that inv-estors do nothing. All too often, private investors are sucked into a market at its peak and then exit at the bottom. Tempting as it might be to withdraw money when markets drop sharply, this merely crystallises an individual’s losses.”

F&C head of asset allocation Paul Niven says: “We expect a recovery in stockmarkets and risk assets in general over the coming months.”

Aon Consulting senior consultant and actuary Marcus Hurd says: “Based on market movements over THe past week, pension schemes have lost over £40bn in a week, which is equivalent to wiping out all the gains that were made in 2007.”

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