Stock markets around the world continued to drop this morning with a move by the British Government failing to provide the initial bounce analysts had hoped for.

The ISEQ index of Irish shares was down another 5pc in early trading today. Despite initially opening more than 1pc up in the first few minutes of trade, by 11.20am this morning it had dropped by more than 5.25pc to 3,126.02, down 173.09 points.

The banks were again seeing volatile trade, with shares in Irish Life and Permanent slumping 12pc to €3.34, Anglo Irish Bank fell 11.44pc and AIB dropped 10.88pc to stand at €2.38 and €4.95 respectively, while Bank of Ireland was down 7.11pc to €3.06.

Global stocks plunged to new depths this morning with London shares down over 5pc. The Paris CAC slumped 4.7pc to 3,556 and the Frankfurt DAX dived by 5.6pc to stand at 5,026.

The falls came after the Tokyo market freefall and saw its worst fall for more than 20 years.

Bailout

Even the British bailout was not enough to stop the global panic in the markets.

The British Government unveiled a bailout of the country's eight main banks worth up to £50bn to help prevent a collapse of the banking system. The package also includes a £200bn credit line for the banks.

Despite this move, London shares briefly slumped over 7pc in early trading. London's FTSE was down 182 points to stand at 4,424 in mid-morning trade.

In a dramatic day on fear-stricken markets, Tokyo's Nikkei index plummeted 9.38pc, its biggest one-day drop since the 1987 ‘Black Monday’ stock market crash, as fear of a global recession continued to spread.

Hong Kong ended down 8.2pc at its lowest level in more than two years.

The panic forced some countries to take dramatic steps to try to stem the selling. Indonesia suspended trading on its market after stocks plunged over 10pc. Trading was frozen on Russia's two main stock markets after plunges of more than 11pc on opening.

Meanwhile, the Sydney market closed down 5pc, Seoul lost 5.81pc and Shanghai shed 3.04pc as the crisis sparked by a US housing slump continued to send shockwaves around the globe.

Today's latest plunges came after Wall Street's Dow Jones sank over 500 points, or 5pc, last night to a five-year closing low.

And US stocks tumbled to massive losses for a fifth straight session last night, capping the Dow's biggest five-day point loss ever. The Dow Jones industrial average fell 508.39 points, or 5.11pc, to 9,447.11.

The blue-chip Dow has now lost more than 1,400 points over the past five sessions, or nearly 13pc of its value.

The continuing turmoil follows another black day on markets yesterday.Fear continued to grip the Irish market yesterday, on Tuesday wiping another €3.25bn off the value of shares.

The index closed 253.79 points lower at 3,299.11 – a drop of 7.14pc on Tuesday. That followed a drop of almost 10pc on Monday.

European stock markets had a mixed performance, with gains in Paris and London and a drop Frankfurt, a day after suffering huge losses on fears for the health of the European banking sector.

- Caroline Crawford