The latest shockwaves in the credit crisis engulfing the global financial system wiped £51 billion from the value of the UK's biggest companies today.
On a dramatic day which saw the Bank of England pump an extra £5 billion into frozen money markets, London's FTSE 100 Index tumbled 3.9%, or 217.3 points, to close at 5414.4 - its lowest level for more than two years.
The sell-off was sparked by the rescue and cut-price sale of ailing US investment bank Bear Stearns yesterday.
US President George Bush intervened to help quell early Wall Street panic with praise for the US Federal Reserve's "strong, decisive action" over the crisis, which has drawn parallels with mortgage lender Northern Rock's woes.
In a rare Sunday move, the US Federal Reserve cut the rate at which it lends to other banks by 0.25% to 3.25% and set up a new lending facility to give investment banks short-term cash if needed.
Panmure Gordon banking analyst Sandy Chen said: "We interpret this as a clear indicator that other firms may be vulnerable."
Prime Minister Gordon Brown also moved to assure markets, saying in Parliament today that Britain will continue to take "whatever action is necessary" to maintain economic stability.
The Bank of England's £5 billion funding injection aimed to ease a sudden freeze in overnight lending between banks following Bear Stearn's troubles.
It is the first such emergency operation since the start of the credit crunch six months ago, but cash-strapped banks were calling for almost five times as much funding leading to fears that the move would not be enough.
The rate at which banks lend to each other for three months also soared to 5.96% today, its highest point this year. The Bank's official base rate is 5.25% but financial institutions fearful of losses are hoarding cash to boost their balance sheets.
In London, a raft of major banks were among the Footsie's biggest fallers, with Barclays off 9%, Halifax Bank of Scotland down 13% and Royal Bank of Scotland 9% lower.
The credit crunch has now seen the value of the UK's top 100 companies fall by nearly 20% since the Footsie reached seven-year highs above 6,700 in June last year.
David Jones, chief markets strategist at IG Index, said: "This just demonstrates the nerves which are still out there and I don't think we've seen the worst of it yet. Every time we think we have, we get another bolt from the blue."
Bear Stearns became the biggest victim of the crunch yet after being forced to seek emergency funding on Friday. It was bought by rival JP Morgan Chase for a cut-price £236.2 million US dollars (£116.4 million) yesterday.
The company was heavily exposed to the mortgage-backed investments hit by the credit crunch. Two of its hedge funds collapsed in July last year in one of the early signs of the approaching crisis.
Last week rumours of problems at the business swept the market, leading to a cash crunch for the firm. The bank looks after millions of dollars for hedge funds, which began demanding their money back as the rumours grew.
But the company had no deposit base to fall back on, forcing it into seeking a rescue.
Oil prices spiked at a new record near 112 US dollars a barrel as fears over the US economy grew and the dollar weakened to a record low of 1.59 against the euro.
The Fed is set to cut interest rates again - possibly by as much as 1% - at its latest meeting tomorrow to spur on the world's largest economy, which is teetering on the brink of recession.
Mr Jones added: "Traders are expecting no let up from the current bout of volatility tomorrow, with all eyes still firmly on the US for tomorrow's interest rate announcement." .