Global markets pounded as economic worries return

Global markets are falling as the gloomy economic news piles up, with banks bearing the brunt of the selling.

In London the FTSE 100 closed 131.2 points, or 2.44%, lower at 5,245 points after sharp opening falls on Wall Street.

The Dow Jones Industrial Average tumbled 2.16% to 10,417 as data showed a widening trade deficit, adding to worries over signs that China's growth is slowing and downbeat economic outlooks from US rate-setters and the Bank of England.

In Europe, France's main CAC index slipped 2.74% while Germany's DAX index dropped 2.1%.

And the few glimmers of good news such as better-than-hoped for UK employment figures were cast aside amid growing concerns that recent gains mean shares have risen higher than is justified.

Shares in Lloyds dropped 5p or 6.8%, to 70p, Barclays retreated 20p to 313.6p and RBS shares fell back 2.45p to 46p.

TUI Travel shareholders had another miserable day, down 13p at 195p after broker downgrades following disappointing earnings yesterday.

Just a handful of shares mustered any gains in the blue chip index with even traditionally defensive Imperial Tobacco gaining just a penny at £18.11.

Smiths group was the only company whose shares made any real advance, up 45p at £11.96, after UBS suggested the group could be split in two.