Share dealers around the globe took fright again yesterday, marking prices sharply lower on worries that the US sub-prime lending implosion could destabilise financial markets and slow economic growth.

Share prices slid in every major stock market in the wake of the second-biggest fall on Wall Street in four years on Tuesday.

In London the FTSE 100 index of blue-chip companies dived 160.5 points to 6,000.7 — lower than the worst closing price during the “Shanghai shiver” of two weeks ago.

Earlier, Japan closed 2.9 per cent lower, Hong Kong 2.6 per cent off, Germany 2.5 per cent off and France 2.4 per cent off.

Wall Street suffered further jitters, with the Dow Jones industrial average initially falling by as much as 136 points to less than 12,000. It closed up 57.40 at 12,133.40 last night. “I think the market got below 12,000 and buyers came in,” said Todd Leone, managing director of equity trading for Cowen & Co.

Mike Lenhoff, chief strategist at Brewin Dolphin, said: “The markets are obviously obsessed with sub-prime lending. They are concerned that the difficulties could spill over into the mainstream mortgage market and consumer spending.”

Dozens of lenders to Americans with no credit record or poor credit records have folded in recent months as their loans have turned sour. Official data on soaring defaults added to the jitters on Tuesday.

Lehman Brothers, one of the biggest players in packaging sub-prime loans and selling them on to institutional investors, yesterday blamed weakness in the residential mortgage sector for disappointing earnings growth in its fixed-income division.

Jim Rogers, the investment expert and former business partner of George Soros, predicted that falling real estate prices would trigger more defaults and affect other asset classes. “You can’t believe how bad it’s going to get before it gets any better,” Mr Rogers said. “It is going to be a huge mess. When markets turn from bubble to reality, a lot of people get burnt.”

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