It is hard to recall a grislier day in the financial markets. We’ve experienced nastier economic shocks. We’ve seen bigger share market falls. We’ve witnessed uglier profit warnings. We’ve heard doomier pronouncements. But never quite so many squeezed into so few hours.

The GDP numbers were horrific. The British economy is shrinking at a far greater than predicted speed. The pound is collapsing at an astonishing rate, plumbing $1.55 at one point yesterday. Shares slid to new five-year lows.

The world economy no longer looks remotely immune to Europe’s and America’s woes. Shares in emerging markets, the regions supposed to soften the economic agony in the West, are down by 15 per cent on the week.

Even the most cautious officials have been rocked by the forces threatening the world’s financial institutions. “This is . . . possibly the largest financial crisis of its kind in human history,” says Charlie Bean, the Deputy Governor of the Bank of England, not a man prone to hyperbole.

The gloom has spread far beyond the world of banking and financial services. Sony, Air France-KLM, Samsung, Microsoft, Daimler, Fiat and Renault are among the groups to have sounded warning notes in the past 48 hours.

The cost of insuring against blue-chip companies defaulting on their bonds ballooned to a record high. The premiums paid on these insurance policies - credit default swaps – are regarded by many officials as the best measure of stress in financial markets, more important even than the wholesale interbank lending rates.

No business is immune. More than £13 billion was wiped from the value of HSBC yesterday. For a bank as broadly based as HSBC to be clobbered like this shows the breathtaking way sentiment is souring in markets and boardrooms. Morgan Stanley reckons the HSBC dividend will have to be cut. The consolation for UK shareholders is that sterling is diving so fast that a cut in the dividend, which is set in dollars, would not necessarily preclude arise in puny pound terms.

Hopes that some of the £37 billion of fresh capital being sought by Lloyds TSB, HBOS and Royal Bank of Scotland could be provided by existing shareholders, rather than taxpayers, are receding again. Their share prices are each below the price at which HMG has promised to underwrite their share issues. Again, too, the market doubts that Lloyds will go ahead with its takeover of HBOS on current terms. HBOS shares are trading at a 40 per cent discount to the value of the Lloyds offer. Meanwhile Barclays’ decision to shun taxpayer help and go it alone is beginning to look brave. Its shares fell 12 per cent to 192p, suggesting that at best it will have to sweeten terms to private investors to persuade them to disburse the £6.6 billion it needs. At worst it will have to do a U-turn and go back to the Treasury for help, help likely to be on penal terms only. Heads might have to roll in those circumstances.

At that point the Government investment would be up to £44 billion and even that might not be enough. We are told that officials have stress-tested the capital needs of the banks to ensure they could withstand even an economic blizzard. That was a fortnight ago, however. Even in that short period, prospects for the British and world economy have further darkened. More borrowers, personal and corporate, seem likely to default.

That £44 billion may look colossal, but it is modest beside the £4,100 billion of total bank assets it has to help underpin. It wouldn’t take such a deterioration in those assets for the banks’ newly fattened capital cushions to look thin again.

The worst-case scenario is that the banks will have to return to the Government for yet more capital. With luck, that won’t be necessary. Mr Bean reckons the banking system is “on a path to recovery”. But after a day as torrid as yesterday, worst-case outcomes should not be ruled out.

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