Barclays shares fell sharply today as market jitters kept London’s FTSE 100 Index deep in the red.
The Footsie was down by 70 points, extending yesterday’s dramatic 2% drop amid fresh fears over losses from the sub-prime lending crisis.
America’s Dow Jones Industrial Average also continued its decline, down more than 60 points as lingering concerns over the fallout from the credit crunch erased any optimism over the resilience of the US economy.
There had been a ray of hope for investors when better-than-expected US payroll figures lent support to markets on both sides of the Atlantic.
But investor nerves saw a sharp relapse into negative territory.
Martin Slaney of GFT Global Markets said: "It’s largely down to market jitters - the markets are highly sensitive after last night’s shredding session and we’re are getting towards the end of a very volatile week."
Barclays bore the brunt of the sell-off in London, with shares down 6%, while Royal Bank of Scotland slipped 5%.
A broker downgrade for Citigroup sparked yesterday’s banking sell-off, amid speculation the firm may cut the dividend it pays to investors, with analysts also citing potential further problems from the credit squeeze.
Barclays, meanwhile, was also suffering amid vague market rumours that it faced funding problems.
Banks analyst Ian Poulter of Landsbanki said it was "unlikely" the speculation was true, adding that investor nerves were fuelling Barclays’ decline.
Worries over inflation in the US, with oil prices soaring ever higher, have also suggested America is not in line for any more rate cuts after this week’s quarter point decrease, leaving investors disappointed.
Stock markets have endured a bumpy ride over the past few months.
Stocks worldwide were hit in the summer as defaults on sub-prime loans caused a tightening in credit markets, resulting in Northern Rock’s high profile liquidity crisis and subsequent bank run.
Markets then rallied, with the Footsie recently surging back towards levels not seen since before the meltdown in money markets.
Persistent fears over the credit crunch and the rocketing cost of crude oil, which was near 94 US dollars a barrel today, has tested investor nerves, as has the continuing weakness of the dollar.
The pound hit fresh 26-year highs against the dollar this week and today stood at more than 2.08 US dollars.