The Dow Jones industrial average fell today below 9000 points for the first time in more than five years, following the emergency rate cut by the world's central banks and the announcement of the UK's £500 billion bank bailout.

Shares tumbled for a seventh straight session amidst fears in the US that the widening credit crisis would tip the global economy into recession, which derailed an attempted market rebound, and financial stocks led the slide.

Although the index of America's top 30 stocks rose at the opening bell, within an hour the bargain hunters' bounce ended, forcing a dip of 1.47 per cent, or 136 points. The Dow closed down a massive 678.9 points or 7.33 per cent at 8,579.19.

A year ago today, the Dow closed at a record high above 14,000.

The broader-based S&P 500 fell 7.62 per cent to 909.9 at close. The Nasdaq fell below 1,700 for the first time since August 2003.

General Motors shares, were down more than 30 per cent after Standard & Poor's put the carmaker's credit ratings on watch negative. Morgan Stanley shares fell more than 25 per cent. Crude-oil futures settled at the lowest point this year.

Investors also hoped the US Government might take ownership stakes in banks, following the British example, to help stabilise the industry.

The influence of the New York stock exchange was felt in London where the FTSE 100, which had peaked at 4,512.5 today, fell 52.9 points or 1.21 per cent to close at 4,313.

The exchanges were being studied carefully by policymakers around the world to see if the half-a-percentage point interest rate cuts, orchestrated by six of the world's leading central banks yesterday, would succeed in allaying the earlier share-price routs.

Continental European stock exchanges rose this morning on hopes that the co-ordinated actions and the UK Government's bailout of Britain's largest banks yesterday would also help to rejuvenate the markets.

However, the three-month dollar Libor rate, which determines lending around the world and which has almost seized up, rose to 4.7500 per cent from 4.5237 on Wednesday, suggesting that the money markets were less enthusiastic about the bailout move.

The eurozone equivalent, Euribor, was steady at 5.393 per cent, the highest level since it was created at the beginning of 1999.

Shares in UK banks rose after their recent battering, with Royal Bank of Scotland up 20 per cent at one stage after a fall of almost 40 per cent on Tuesday. RSB closed the day up 5.84 per cent at 96p. HBOS was the biggest riser in the FTSE, up 31.2 per cent, but Barclays, one of yesterday's biggest fallers, continued to slide, down 13 per cent.

There was more bad news for the pound as it fell to $1.71 against the dollar at one stage - its lowest level for almost three years - before rallying.

Oil prices steadied at above $89 a barrel, after falling to their lowest level for a year yesterday on that fears that there would be less demand for energy during a global slowdown.

Germany’s Dax index lost 2.53 per cent and ended the session at 4,887 points while France’s Cac 40 shed 1.55 per cent to finish at 3,442.70.

In Russia the RTS stock exchange said it was suspending trading for an hour as its main index gained over 12 per cent.

Russia’s other exchange, the MICEX, had already suspended and resumed trading twice today because of the steepness of stock gains. Its index was trading 14 per cent higher at the time of the RTS suspension.

Mining stocks rose sharply today as traders anticipated that commodity prices would stay high, while Asian shares made small gains after the central banks in South Korea,Taiwan and Hong Kong followed the leading central banks in cutting interest rates.

The Bank of England cut interest rates by half a percentage point in an effort to lift the economy yesterday, as did the US Federal Reserve and the European Central Bank. The Swiss, Canadian, Swedish and Chinese central banks also reduced rates.

The MSCI index of Asia-Pacific shares outside Japan rose 1.6 per cent after a fall of 9 per cent on Wednesday, its biggest single-day fall in at least 20 years.

Japan’s Nikkei share average finished 0.5 per cent lower, down for the sixth day running, to close at its lowest level since June 2003.

Hong Kong’s Hang Seng index bounced back by 2.7 per cent after three days of losses.

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