Downing Street: Don't panic

LONDON shares suffered another hair-raising roller-coaster ride, with the FTSE-100 Index crashing to fresh six-year lows. As renewed fears about US corporate scandals swept through global markets, the Footsie dropped through the 3700 barrier for the first time since July 1996.

It was down 200.9 points to 3657.1 by mid afternoon, until talk of a US interest rate cut bosted the Dow Jones index on Wall Street and reversed the fall in London. At the close, the Footsie was off 80.9 at 3777.1.

'It's depressing,' said Steve Graves, senior trader at stockbroker Gerrard. The Footsie could fall as low as 3500, he added.

The blue-chip index has collapsed by 1,000 points since the start of July, leading to serious worries about the impact of the rout on the economy and the nation's savings. Mike Taylor, senior economist at Merrill Lynch, said: 'There comes a point when markets fall so far that you get a sudden fear factor among consumers and they stop spending money. Falls of the magnitude we have seen mean we are now getting into that realm.'

However, Tony Blair called for calm over the stock market decline. His spokesman said: 'The Prime Minister believes in the fundamental strength of the British economy. This country is better placed than many other countries to survive the ups and downs of the stock market.' Executives around the world, though, said in a survey that collapsing share prices posed a bigger threat to commerce than international terrorism.

This week's slides have much to do with a gathering potential scandal around the dealings of Enron, the fallen American energy trader. A US senate committee is probing a series of transactions between Enron and its lenders, including Barclays and Royal Bank of Scotland, which allegedly hid the extent of Enron's mountainous debts.

The main focus of the probe is on the giant US banks JP Morgan Chase and Citigroup, who investigators claim provided the bulk of the questionable loans through offshore accounts in Jersey. 'People just don't know if they can trust anybody in corporate America any more,' said one dealer.