Commodities ravaged | Bruiser of Wall St looked after people | Memorabilia worth more than bank | Middleman left holding parcel | Leader: after Lehman

The FTSE 100 fell further towards the 5,000 mark today after the Bank of England pumped an additional £20 billion in funds into the UK financial market to calm fears sparked by Lehman Brothers' collapse and the future of AIG, the US insurance giant.

London's leading shares fell by 2.8 per cent, or 139.5 points, to 5,064.7 when it emerged that the Bank of England was extending its funding on top of yesterday's £5 billion cash injection.

HBOS, which owns Halifax, Britain's biggest mortgage lender, led the fallers, losing a further 25 per cent today to 174.1p, after closing 18 per cent lower yesterday.

The Bank of England is concerned that UK financial institutions will stop lending money to each other in the wholesale money market to hoard cash instead and consequently cut off liquidity to lenders in need of funding.

HBOS, which owns Halifax, Britain's biggest mortgage lender, is regarded as particularly vulnerable because it has to refinance £120 billion worth of funding in the next three months in an increasingly expensive wholesale market.

Overnight, the cost of borrowing in the wholesale money markets rose from 5.5 per cent to 6.8 per cent —1.8 per cent above the UK interest rate.

This time last year, Northern Rock, the UK mortgage lender, was forced to ask the Bank of England for an emergency £26 billion loan after the wholesale money market seized up and the cost of borrowing spiralled.

The prospect of an imminent interest rate cut also receded today after it emerged that inflation in August has risen by more than expected to 4.7 per cent. Inflation is now at same rate as in early 1992 when Britain was in the grip of recession, and above the 4.6 per cent widely expected today by analysts.

Yesterday, the FTSE 100 index of blue chip companies fell 190.70 points as traders reacted to Lehman Brothers' bankruptcy and AIG's search for $40 billion (£22 billion) to bailout the US insurance giant.

Barclays, which today admitted it is examining whether to buy some of Lehman Brothers' assets, also saw its shares fall, down 5.3 per cent to 299.25p

In Asia, where markets in Japan and Hong Kong re-opened after Monday's national holiday, the Nikkei fell by 5 per cent, losing 605.04 points to end the day at 11,609.72 — the lowest close since July 2005.

In Hong Kong, the main Hang Seng index opened around 5 per cent lower, and in Korea the main index fell by nearly 6 per cent as investors bailed out of Samsung, the country’s largest bellwether stock.

Elsewhere in Asia, where trading had also been shielded from the worst of Monday’s mayhem by market holidays, the opening bells were a trigger for explosive movements in currencies, stocks and commodities.

The dollar plunged against the yen by its biggest one-day margin for nine years while investors in mainland China, whose market received the supposed fillip of a central bank interest rate cut yesterday, lopped 3 per cent of value off the main index within a few minutes of trade starting.

Singapore oil deals quickly knocked $3 per barrel off Asian crude oil prices, sending the price down to a seven-month low of $92.85: many traders said that with the global economic outlook now in tatters, crude may not see solid support until about $85 per barrel.

As a measure to take the edge off the market’s gathering fear, the Bank of Japan (BOJ) stepped into money markets early on Tuesday morning with an injection of Y1.5 trillion ($14.4 billion).

Masaaki Shirakawa, the BOJ governor, promised that the central bank would keep the market stoked with ample funds as the Wall Street crisis unfolds.

“The Bank of Japan will closely watch development surrounding the latest US financial institutions and its impact, and will continue to take appropriate measures to maintain smooth settlement and stability in the financial market,” the bank said in a statement.

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