Stocks worldwide have plummeted in the wake of yesterday's unprecedented decision by leading central banks to pump billions into money markets in a bid to avoid a worldwide recession.
The Bank of England has joined the U.S. Federal Reserve, the European Central Bank and their counterparts in Canada and Switzerland to pump at least £55billion into money markets.
However this morning the FTSE 100 fell more than 70 points to 6458.7 and the markets in Japan, Hong Kong and Taiwan all suffered nervous starts to the day's trading.
Investors are worried that the shock decision by the world's banks could mean that the credit crisis is likely to get worse.
It is hoped that the loans - £ 22.7billion of which will go to the UK - will help make lending between banks easier, avoiding any repeat of the Northern Rock crisis.
The Rock ran into trouble because the current economic climate has encouraged banks to hoard their cash, rather than lend it to each other.
Northern Rock could therefore not borrow the money it needed from other banks, and was forced to go to the Bank of England as a "lender of last resort" at punitive rates.
The central banks' decision is designed to stop other lenders getting into the same situation - and to avoid panic among both consumers and the City.
It came amid signs that Gordon Brown is bracing himself for a slowdown that could dent his credentials as the architect of Labour's record of economic stability.
A Bank of England spokesman said: "This co-ordinated set of actions is a response to stresses in the inter-bank markets, which have increased in recent weeks, reflecting sentiment about the global financial sector.
"The actions demonstrate that central banks are working together to try to forestall any prospective sharp tightening in credit conditions."
A source at the Bank added that the latest move is not designed to prop up any individual lender, but is rather aimed at alleviating pressures in the overall market.
This is significant, because the Bank is worried that City observers could interpret the massive loan as a covert way of getting cash to a particular lender which has got itself in trouble.
The co-ordinated move took the City by surprise, fuelling fears that the global credit crunch is threatening the economic health of the world's major powers.
With the housing market in turmoil, it was seen as a pre-emptive strike to prevent a worldwide financial meltdown on the back of the American "sub-prime" mortgage crisis.
Bankers hope it will make mortgages easier to arrange amid signs that credit is drying up on the High Street.
Downing Street welcomed the move as an example of the kind of "global co-operation and preventative action" that Mr Brown has called for in the past.
It came only a week after the Bank of England cut interest rates by a quarter point.
The Federal Reserve also reduced U.S. rates by a quarter point - the latest in a series of aggressive cuts.
Yesterday's announcement marked the first joint international effort to support the markets since the September 11 terror attacks.
Observers said the scale and nature of the cash injection is unprecedented.
It underlines the parlous state of the global banking system, where some lenders have been brought to the brink of collapse because of the problems in America's mortgage market.
Experts estimate the record defaults on so-called sub-prime loans advanced to Americans with poor credit histories could lead to up to £200billion of losses at global banks.
Giants such as Wall Street's Citigroup and Switzerland's UBS have gone cap in hand to Asian and Middle Eastern investors asking for cash to support their businesses after racking up tens of billions in losses.
Britain has been far from immune, with the run on Northern Rock leading the Bank of England to hand over billions of pounds of taxpayers' money to keep it afloat.
The Bank will next week offer £11.35billion to selected commercial lenders with a UK presence.
A similar auction for another £11.35billion will take place in the New Year.
Banks will "bid" for the cash and will have to pay a premium rate.
Major British-based lenders will also be able to apply for help from the other central banks.
The loans will last for three months and the Bank could step in again if the cash injection fails to have the desired effect.
The banks will still have to provide collateral and meet certain conditions in order to get help, and only those judged to be in sound financial condition will be able to participate.
The Bank of England held a similar auction for three-month loans in September.
However, there were no bidders, because banks were worried that the stigma attached to the auction would reduce confidence in them so soon after the run on Northern Rock.
That auction had a punitive minimum rate set at one per cent above the Bank's base rate, whereas the new auctions do not have a minimum rate.
The Bank has been accused of being slow off the mark in dealing with the stress in financial markets, and some experts described its decision to participate in the global loan scheme as another Uturn from its hardline stance.
Governor Mervyn King has been reluctant to rescue big banks which are in trouble because of their foolish investments - but with the world markets under increasing pressure, he has been forced to act.
The British Bankers' Association welcomed the move, calling it a "constructive and imaginative initiative".
It added: "It is also importantly an international solution to an international issue."
Julian Jessop, of analysts Capital Economics, said the move is welcome, but that further interest rate cuts would be needed to have a real effect.
He added: "Central banks have combined to reduce the risk that the credit crunch tips the most vulnerable economies into recession. But even if these measures are successful, the world economy is still facing a marked U.S-led slowdown in 2008.
"It does not resolve the more fundamental weaknesses in the world's major economies.
"Official interest rates will still have to be cut significantly further in the U.S. and the UK, and are likely to fall earlier than generally expected in the eurozone too."
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