Global markets tumble before G7 meeting

Frantic selling swept through Europe and Asia on Friday as fears over global recession continued to wreak havoc. Eyes will be on the Group of Seven major industrialised nations meeting in Washington DC later today to see what can be done to reassure investors. The U.S government is considering guaranteeing billions of dollars of bank debt and temporarily insuring all U.S. bank deposits.

Stocks across the world experienced free fall this week as Europe joined in a frenzied sell off in Asian stocks. The Dow Jones and the Nikkei both fell below 9000 for the first time since 2003 and the benchmark world index dropped to its lowest level in five years. European shares were hit hard, falling almost 25% on the week. On Friday the Nikkei in Japan recorded its biggest one day fall since the 1987 crash.

In London sterling hit its lowest level in almost 5 years against the greenback over continued tensions between the U.K and Iceland. Prime Minister Gordon Brown stated on Thursday that Britain may freeze the assets of Icelandic companies. There is a disagreement over who should compensate savers in the UK that had money invested in Iceland after its banking system collapsed. ``There are some worries over the U.K.'s exposure to Iceland,'' said a currency strategist at Forecast Pte Ltd. ``The British have put money into Iceland's banks and they are not able to access that.'' There was also heightened speculation that the Bank of England would further reduce interest rates after its half point cut earlier in the week. The GBP/USD was trading at 1.6943 at 9.06am GMT.

Coordinated interest rate cuts by central banks across the world over the last two days failed to offer much support in the crisis. Earlier in the week, the European Central Bank cut interest rates for the first time in 5 years as concern escalated over the state of the economy in the euro zone. The EUR/USD fell to its lowest level in over a year and was trading at 1.3610 at 9.06 am GMT.

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