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Wall Street saw its biggest drops in nearly two months, as the inauguration of President Barack Obama failed to lift investors' moods.

Last night the Dow Jones closed down 4.01 per cent to 7,949.09 – dropping below the 8,000 mark for the first time since November.

No shares recorded gains – as the banks taking the lion's share of the hit – with Bank of America down 28.97 per cent, JP Morgan Chase falling 20.73 per cent and Citigroup losing 20.00 per cent.

The Nasdaq was down 5.78 per cent.

In London this morning, the FTSE 100 continued its downward path of the last two week, falling 0.61 per cent to 4,066.46 – a fall of 24.94 points – at 8:32 GMT.

After yesterday's banking sell off in, lenders saw a bounce – although their low stock price amplified gains.

Royal Bank of Scotland rose 6.80 per cent to 11p, while Lloyds Banking Group was up 2.46 per cent to 45.90p.

Old Mutual rose 5.33 per cent.

However, Barclays saw a return of pressure – falling 17.01 per cent to 60.50p.

Standard Life was down 6.10 per cent, ICAP fell 5.20 per cent, Royal & Sun Alliance slipped 4.13 per cent and Aviva slid 3.51 per cent.

On the currency markets, the pound was down 0.88 per cent against the dollar to $1.375, while it dropped 1.13 per cent against the euro to €1.066 – as confidence waned in the UK economy.