Leading shares around the world fell further into the grip of a global bear market last night as fretful investors took flight from equities fearing a dire combination of surging inflationary pressures and faltering growth.

Escalating fears among dealers, analysts and investors that losses in the leading equity markets could mount rapidly amid a growing barrage of profits warnings and grim economic news sent shares tumbling yesterday in both Europe and Asia.

With US markets on Wall Street closed yesterday after American blue-chip stocks sank into bear market territory earlier in the week, their cumulative losses reaching more than 20 per cent from peak levels, it was the turn of Tokyo to set the tone for yesterday's bleak trading conditions.

Japan's stock market extended a protracted run of losses for a 12th day in a row overnight yesterday, notching up a grim record as it registered its longest such losing streak since a 15-day long run of losses in 1954.

Tokyo's Nikkei 225 index fell a further 0.2 per cent yesterday to end the week down 2.3 per cent, with its losses over the 12-day losing run totalling a hefty 8.4 per cent.

The Nikkei is now mired deep in bear market territory, standing 27.14 per cent down over the past 12 months.

Japanese gloom rapidly infected European markets from the open yesterday, with further steep losses on the Paris and Frankfurt bourses fuelled as anxieties over a still-worsening toll from the credit crunch mingled with heightened concern over the worsening economic outlook.

European shares as a whole ended down more than 1 per cent, and almost 2.5 per cent on the week, based on the FTSEurofirst 300 index of the continent's leading blue-chip groups.

In Germany, the Dax index ended down a further 81.53 points, or 1.3 per cent, leaving it down more than 21 per cent over the past 12 months, while in France, the CAC40 shed 1.8 per cent, taking its cumulative 12-month losses to more than 30 per cent.

Pessimism among European investors was compounded by a warning from Goldman Sachs, the investment bank, in a note to clients, that Europe's banks might try to raise between €60 billion (£47.5 billion) and €90 billion if a steep turn in the credit cycle meant that they succumbed to losses comparable to the last such episode a decade ago.

Goldman said that it had cut its performance forecasts for more than 40 banks, and cut share price targets for a number of those, including Royal Bank of Scotland, Deutsche Bank, Barclays and UBS.

In London, the FTSE 100 index shared in the general misery, dropping by a further 63.8 points, or 1.2 per cent, to end a grisly week at 5,412.8, notching up its seventh straight weekly loss.

The FTSE is also now on the brink of a bear market, with its losses over the past 12 months totalling 18.89 per cent.

Strategists sounded warnings of worse to come, with a further sell-off in shares set to be fuelled by both the present deluge of economic woes and the problems of specific sector, notably the financial industry.

“If you look at the technicals and the fundamentals, people think that there is still some way for it [the FTSE] to fall - probably another 250 points before we get any recovery,” Neil Parker, of RBS said. “Nobody wants to be long in this market ... I would be particularly worried by a lot of inflation numbers that are coming out.”

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