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Markets in Europe and the US fell today as further fears of recession grew, after both Gordon Brown and Mervyn King admitted a UK recession was likely.

In London the FTSE 100 dropped 4.47 per cent to 4,040.52 – a drop of 189.21 points.

Meanwhile in Paris and Frankfurt the Cac 40 and Dax were down 5.21 per cent and 5.12 per cent.

On Wall Street the Dow opened with a drop. At 11:42 EDT (16:42 BST) the index was down 3.17 per cent, while the Nasdaq dropped 1.81 per cent.

In London British Airways shares were up on news Cathay Pacific was planning a bid for the UK airline.

BA shares were up 4.37 per cent to 148.10p on the unconfirmed rumours.

Man Group was up 2.98 per cent, and Drax rose 1.57 per cent.

Pharma giants AstraZeneca and GlaxoSmithKline rose 1.53 per cent and 1.33 per cent respectively.

Elsewhere the index was dragged down by the mining stocks.

Kazakhmys was down 15.57 per cent, Xstrata dropped 13.73 per cent and Vedanta Resources dropped 13.11 per cent.

Royal Bank of Scotland slid 13.87 per cent and Aviva lost 12.36 per cent.

Anthony Grech, market strategist at IG Index, said: "Today's movement has seen Monday's 5.4 per cent jump for the FTSE quickly wiped out; an increasingly regular occurrence in these volatile times.

"Tuesday saw the UK's leading index drop 1.2 per cent, and today's decline has taken the index back to around the week's starting levels, just above 4000."

He added the markets are now increasingly focusing on the impending global recession, as the gains from the banking rescue packages are now forgotten.

Today also saw sterling fall to a five-year low against the dollar. At 16:00 BST £1 was worth £1.633 – a drop of 2.16 per cent – as fears grow the recession will hit the UK hardest and further interest rate cuts will come.

"As the FTSE nears the 4,000 level again, predicting the next move is almost akin to pinning a tail on the donkey," said Mr Grech.

"But with negative indicators and downbeat reporting updates the current norm, the outlook for any sustained rally over the next few days looks bleak."