Fresh worries over the slumping US housing market sent London's leading shares lower today and kept the pound above the two-dollar mark.
The FTSE 100 Index fell by as much as 100 points to within sight of January's lows as Asian markets followed Wall Street down on gloomy figures showing record US home repossessions in the final three months of 2007.
The prospect of further interest rate cuts to boost the flagging US economy sent sterling above 2.01 dollars, while the euro also rose to a record 1.54 against the greenback. Both the Bank of England and the European Central Bank held rates unchanged yesterday, strengthening the two currencies.
Wall Street's Dow Jones Industrial Average fell more than 200 points overnight as the downbeat housing data fuelled more fears over the source of the credit crunch - spiralling default levels among high-risk borrowers hitting confidence in mortgage-backed investments.
Pressure on markets has also come from a run of record oil prices in recent days - to a peak of nearly 106 US dollars a barrel yesterday - as nervous investors attempt to stave off dollar weakness by moving their money into the commodity.
In London, the Footsie recovered slightly from a session low of 5662.5 but remained 1% down on losses for heavyweight banking and mining stocks.
Exchanges across Europe were also showing losses and investors are now focused on US job figures due later today to gain a clearer picture of the state of the world's largest economy.
CMC Markets trader Matt Buckland said: "Attention is going to be firmly fixed on the US employment data whilst ongoing concern over the financial stocks may leave the banks under further pressure in the near term too.