Analysis: Black Monday | Two-minute catch up | Countdown to bankruptcy | Merrill Lynch seals future | Q&A: are my savings safe?

Shares on Wall Street today plunged in the wake of Lehman Brothers' collapse into bankruptcy and fears over the future of AIG, the US insurance giant secures a $20 billion funding bailout.

The Dow Jones industrial average slumped more than 4.42 per cent, losing 504 points to fall to 10,917 - its worst one-day percentage loss since July 2002. Analysts had expected the Dow Jones to lose 400 points on opening.

The Standard & Poor’s 500 Index was down 58.74 points, or 4.69 per cent, to finish unofficially at 1,192.96 - its worst one-day percentage performance since September 2001. The Nasdaq Composite Index was down 81.36 points, or 3.60 per cent, to close unofficially at 2,179.91.

Times Archive, 1929: Wall-Street panic

A Niagara of liquidation fell upon the American Stock Exchange today

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Shares of financial services companies were the hardest hit, with AIG down 60.8 percent and Bank of America down 21per cent.

In London, the FTSE 100 index of leading companies closed 3.9 per cent down or 212.9 points at 5,203.8, dragged down by banking stocks led by HBOS, the bank that owns Halifax, the UK's largest mortgage lender, whose shares fell by 17.5 per cent to 232.75p.

Shares in AIG, the stricken American insurance group that was once the largest in the world, fell by 50 per cent to just $5.99 after failing to provide an update about its financial health.

The US Government has asked Goldman Sachs and JP Morgan Chase to lead a $75 billion emergency funding package for AIG to keep the embattled American insurance giant afloat. The dramatic intervention came this afternoon after AIG had earlier secured approval from New York State authorities to liberate $20 billion (£11.2 billion) from its own balance sheet.

The agreement, signed off by David Paterson, the New York Governor, formed part of a wider financial rescue.

Early this morning, Lehman Brothers filed for Chapter 11 bankruptcy protection from its creditors in the US while its European arm went into administration, leaving 26,000 Lehman staff at risk of losing their jobs.

Hours after Lehman collapsed, the Bank of England and the European Central Bank (ECB) acted to stop escalating panic by pumping nearly £30 billion into financial markets.

The Bank of England made £5 billion worth of short-term funding available to guard against fears that financial markets will grind to a halt if banks, spooked by the collapse of Lehman, stop lending to each other.

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