Today's intra-day slide in the FTSE 100 to 5,358 provides technical corroboration of what has long been apparent: we are now in bear market territory. This morning the FTSE 100 fell more than 20 per cent from last summer's high, although it later recovered and now hovers perilously close to going below again.

But there are in effect two stock markets sitting within the FTSE 100. Once the effect of record commodity and energy prices have been stripped out - miners and oil producers account for about one third of the index - the FTSE 100 has actually fallen by more than 20 per cent since the start of this year alone. It is a fact of which anyone holding shares in the banking, retail or housebuilding sectors is only too aware.

Neither is there any sign that share prices are near their trough. Profit downgrades are increasing, economic growth is slowing and inflation and interest rate worries remain to the fore.

But perhaps the biggest problem is that prospective buyers of equities are thin on the ground. Pension funds and life insurers continue to shift cash out of equities and into bonds. More money has flowed out of European retail funds this year than at any time in the last decade - an annualised €100 billion, according to Citigroup. Hedge funds and private equity players are increasingly constrained by a lack of access to capital. Even companies are buying back fewer of their own shares, preferring the comfort of retaining reserves of cash on their balance sheets.

If there are grounds for optimism it is that, on the basis of forward earnings multiples, European equities are at their cheapest levels since the early 1990s. However, given the speed at which earnings forecasts are falling, that is not a measure in which too much trust should be placed.

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