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The FTSE 100 fell over four per cent at midday today, as global recession fears continued to worry investors.

At 12:24 GMT, the London index stood at 3,667.68 – a drop of 162.41 points or 4.24 per cent.

The index is now at its lowest since March 2003 and further drops would push the FTSE 100 to levels last seen in 1996.

HSBC was leading the drops – down 19.80 per cent – as investors reacted negatively to its rights issue and candidness over US subprime losses as profits dropped 62 per cent.

British Land and Land Securities also both saw their share prices drop heavily along with Lloyds Banking Group.

In Europe the Frankfurt's DAX was down 2.99 per cent and the Cac40 in Paris fell 3.52 per cent.

All eyes are now turning to New York and how the Dow Jones will react to AIG recording the largest quarterly loss in American history - $61.7 billion (£43 billion) - and a new revamped bailout.

On Friday the Dow closed at a 12-year low at 7,062.93 – still over the 7,000 barrier.

David Jones, chief market strategist at IG Index, said: "In pre-market trading, the Dow Jones is in the red by more than 100 points, indicating an open this afternoon below the psychological 7000 mark that had provided some brief support last week.

"This US index has now dropped by 50 per cent from the all-time highs seen in October 2007 and is now back at levels last seen in May 1997."

He added with markets so volatile, no one should be too surprised if there was a sharp oversold bounce back from these levels.

"But the weakness seen around the world today shows that investors continue to have precious little faith in the various bailout and stimulus packages and have once again been forced to revise their expectations about just how bad the economic situation could get," Mr Jones concluded.