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Wednesday 03rd of December 2008
October 6, 2008

Panic hits FTSE despite Chancellor’s reassurance

by Kay Murchie

The FTSE 100 plummeted today to close at 4,589.2, after falling 391.1 points - or 7.85%. The fall marks the biggest one-day points fall ever and was the third-worst percentage fall since the FTSE 100 was launched in 1984.

The fall comes despite Chancellor Alistair Darling announcing that the Government will do whatever it takes to ensure the stability of the financial system, however, the Government has not said it will guarantee all bank savings like some of its European counterparts.

Mr Darling said that the euro zone needed to work together to respond to the global financial crisis, and an emergency meeting is to take place in Luxembourg in the next few days.

Mr Darling said the Bank of England is to pump a further £40 billion into the financial system tomorrow in a bid to ease the credit crunch.

European stocks also suffered and across the Atlantic, shares dived on Wall Street as the Dow Jones Industrial Average fell below the 10,000 mark for the first time in 4 years.

The fall on Wall Street comes even though the US $700 billion (£380 billion) bailout plan was finally approved late on Friday night.

Today, German Chancellor Angela Merkel announced the Government will guarantee all retail savings deposits. However, the announcement rocked its fellow European nations after French President Sarkozy is seeking the support of European leaders for a €300 billion (£237 billion) bailout fund to rescue struggling banks throughout Europe.

The move from Germany came after one of the country’s largest lenders, Hypo Real Estate, struggled to stay afloat.

Last week, it was announced that Iceland’s third largest bank, Glitnir, was nationalised after it faced short-term funding problems. It was the first bank in the country to be nationalised since the start of the credit crunch.

Meanwhile, Geir Haarde, Iceland’s Prime Minister, said the country’s biggest banks have agreed to sell off some of their overseas assets and bring them back to Iceland. As well as boosting the economy, it is hoped that the move will prevent the Icelandic currency, the krona, from falling any further.

In the UK, it was confirmed by the Financial Services Authority (FSA) that the compensation limit for bank deposits has been increased from £35,000 to £50,000 and will take effect on Tuesday, 7 October.

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