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The FTSE 100 ended the day 8.85 per cent down after falling ten per cent in the morning session.

The index lost 381.74 points over the day to end the week at 3,932.06 following market slumps all over the world.

Several stocks staged recoveries by the close of trading, after every stock slid into the red earlier.

Oil and financial stocks were the biggest losers on the index, with BP falling 33.25 per cent and Royal Bank of Scotland down 25.31 per cent.

HBOS dropped 19.09 per cent and Barclays was down 14.17 per cent – as pressure maintained on the financials.

Stock markets around the world were down, with the Dow Jones down 4.72 per cent by 16:59 BST and the pan European FTSEuroFirst 300 falling by 7.82 per cent by 16:25 BST.

In France the Cac 40 dropped 7.73 per cent and the Dax in Frankfurt was down 7.01 per cent.

After a volatile week of bank bailouts and coordinated interest rate cuts, the FTSE 100 has fallen 20.2 per cent and has lost 40.6 per cent of its value over last 12 months.

David Jones, chief market strategist at IG Index, said: "It’s been another ugly day in London.

"If the sharp slide seen at the beginning of January was the market taking a peek into the abyss, then this week has seen us jump down both feet first. The selling this week has been relentless across all financial centres - every day the expectation has been for it to at least pause but it has actually got worse.

"For October, the FTSE 100 is down by around 18 per cent - and we are not even halfway through the month yet. The various central bank interventions have had negligible effect so far - but this really should not come as that much of a surprise. When the markets last experienced severe declines from the year 2000, the US Federal Reserve cut all the way down but markets still slid."

He added: "There is a real sense of despair and although some are pinning their hopes on the G7 meeting at the weekend being able to wave a magic wand and make it all go away, it is difficult to see what can be done to effect a handbrake turn in sentiment in the short term.

"The next obvious ‘big’ level for the FTSE is the low around the 3300 mark, where the last major bear market bottomed out in 2003 - but not surprisingly many traders would still rather be positioned short on the index rather than trying to stand in front of the runaway train that the markets have become this week."